MANU/SC/1310/2023

Equivalent/Neutral Citation: 306(2024)DLT162, 2023 INSC 1051, 2023(16)SC ALE160, (2024)4SC C 1

IN THE SUPREME COURT OF INDIA

Arbitration Petition (Civil) No. 38 of 2020, SLP (C) Nos. 8607 of 2022 and 5833 of 2022
Decided On: 06.12.2023
Cox and Kings Ltd. Vs. SAP India Pvt. Ltd. and Ors.
Hon'ble Judges/Coram:
D r . D.Y. Chandrachud, C.J.I., Hrishikesh Roy, J.B. Pardiwala, Manoj Misra,
Pamidighantam Sri Narasimha, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: Hiroo Advani, Adv., Divyakant Lahoti, AOR, Praveena
Bisht, Madhur Jhavar, Vindhya Mehra, Kartik Lahoti, Rahul Maheshwari, Garima Verma,
Kumar Vinayakam Gupta, Mallika Luthra, Saksham Barsaiyan, Shivangi Malhotra,
Navdeep Dahiya, Advs., Nakul Dewan, Sanjoy Ghose, Sr. Advs., Jeevan Ballav Panda,
Shalini Sati Prasad, Satish Padhi, Meher Tandon, Gaurav Sharma, Dhriti Mehta, Rohan
Mandal, Rohan Andrew Naik, Advs., Khaitan & Co., AOR and Nagarkatti Kartik Uday, AOR
For Respondents/Defendant: Tushar Mehta, SG, Kanu Agrawal, Adv., Rohan Batra, AOR,
Ritin Rai, Sr. Adv., Farhad Sorabjee, Adv., Dheeraj Nair, AOR, Kumar Kislay, Pratik
Pawar, Siddhesh Pradhan, Shanaya Cyrus Irani, Aishna Jain, Advs., Apoorv Shukla, AOR,
Anirudh Krishnan, Shiva Krishnamurti, Advs., Balaji Srinivasan, AOR, Rohan Dewan,
Sukanya Joshi, Vishwaditya, Niti Richariya, Gauri Pasricha, Ramkishore Karnam, Adarsh
Subramanian, Mahaswetha S., Varun Venkatesan, Mohit Kumar, Anisha C., George
Pothan Poothicote, Manisha Singh, Jyoti Singh, Ashu Pathak, Advs., Arunava Mukherjee,
Debesh Panda, Pallav Mongia, AORs, Tushar Srivastava, Vijay Deora, Jayesh Gupta, Ritik
Sharma, Ajay Bhargava, Vanita Bhargava, Aseem Chaturvedi, Trishala Trivedi, Milind
Sharma, Advs., Khaitan & Co., AOR, Ujjwal A. Rana, Himanshu Mehta, Advs., Gagrat and
Co., AOR, Darius J. Khambata, Sr. Adv., Sonali Malik, Harsh Vardhan Arora, Tushar
Hathiramani, Rishabh Bhargava, Dhruv Sethi and Vidhi Shah, Advs.
Case Note:
Arbitration - Validity of doctrine - Sections 2, 7 and 8 of Arbitration and
Conciliation Act, 1996 - Issue in present case is with regard to validity of the
'Group of Companies' doctrine in the jurisprudence of Indian arbitration -
Whether the Group of Companies Doctrine should be read into Section 8 of
the Act or whether it can exist in Indian jurisprudence independent of any
statutory provision and whether the Group of Companies Doctrine should
continue to be invoked on the basis of the principle of 'single economic
reality' and that, whether the Group of Companies Doctrine should be
construed as a means of interpreting implied consent or intent to arbitrate
between the parties; and whether the principles of alter ego and/or piercing
the corporate veil can alone justify pressing the Group of Companies Doctrine
into operation even in the absence of implied consent.
Facts:
Five judges of this Court are called upon to determine the validity of the
'Group of Companies' doctrine in the jurisprudence of Indian arbitration. The
doctrine provides that an arbitration agreement which is entered into by a
company within a group of companies may bind non-signatory affiliates, if the
circumstances are such as to demonstrate the mutual intention of the parties
to bind both signatories and non-signatories. This doctrine is called into
question purportedly on the ground that it interferes with the established
legal principles such as party autonomy, privity of contract, and separate legal
personality. The challenge before this Court is to figure out whether there can
be a reconciliation between the group of companies doctrine and well settled
legal principles of corporate law and contract law.
Held, while answering the reference
1. The definition of "parties" under Section 2(1)(h) read with Section 7 of the
Arbitration Act includes both the signatory as well as non-signatory parties.
Conduct of the non-signatory parties could be an indicator of their consent to
be bound by the arbitration agreement. The requirement of a written
arbitration agreement under Section 7 does not exclude the possibility of
binding non-signatory parties. Under the Arbitration Act, the concept of a
"party" is distinct and different from the concept of "persons claiming through
or under" a party to the arbitration agreement. The underlying basis for the
application of the group of companies doctrine rests on maintaining the
corporate separateness of the group companies while determining the
common intention of the parties to bind the non- signatory party to the
arbitration agreement. The principle of alter ego or piercing the corporate veil
cannot be the basis for the application of the group of companies doctrine.
The group of companies doctrine has an independent existence as a principle
of law which stems from a harmonious reading of Section 2(1)(h) along with
Section 7 of the Arbitration Act. To apply the group of companies doctrine, the
courts or tribunals, as the case may be, have to consider all the cumulative
factors laid down in Oil and Natural Gas Corporation Ltd. v. Discovery
Enterprises Pvt. Ltd. Resultantly, the principle of single economic unit cannot
be the sole basis for invoking the group of companies doctrine. The persons
"claiming through or under" can only assert a right in a derivative capacity.
The approach of this Court in Chloro Controls (I) P. Ltd. v. Severn Trent Water
Purification Inc. and Ors. to the extent that it traced the group of companies
doctrine to the phrase "claiming through or under" is erroneous and against
the well-established principles of contract law and corporate law. The group
of companies doctrine should be retained in the Indian arbitration
jurisprudence considering its utility in determining the intention of the
parties in the context of complex transactions involving multiple parties and
multiple agreements. At the referral stage, the referral court should leave it
for the arbitral tribunal to decide whether the non-signatory is bound by the
arbitration agreement; and in the course of this judgment, any authoritative
determination given by this Court pertaining to the group of companies
doctrine should not be interpreted to exclude the application of other
doctrines and principles for binding non-signatories to the arbitration
agreement. [165]
Pamidighantam Sri Narasimha, J.
2. Various jurisdictions use both consensual and non- consensual legal
principles to determine whether a non- signatory is a party to an arbitration
agreement. The Group of Companies doctrine is applied irrespective of the
distinct juridical identities of each member of the group when they share a
common economic reality by virtue of their role in the formation,
performance, and termination of the contract. The principle is based on
mutual intention of all the parties to settle the dispute through arbitration.
The acceptance of the doctrine is highly contested across jurisdictions. The
doctrine was developed in France and is applied there by emphasising mutual
consent of the signatory and non-signatory companies. On the other hand,
countries like the United Kingdom and Singapore have expressly rejected the
doctrine and have emphasised the fundamentality of separate legal
personalities of members within the same group. Some jurisdictions, such as
Switzerland and the USA, have not accepted the Group of Companies doctrine
in those terms. However, they invoke other legal principles to hold a non-
signatory to be a party to the arbitration agreement (such as conduct, implied
consent, contractual and agency principles). American courts also solely rely
on equity considerations (non-consensual) to hold a non-signatory to be
party, such as when they apply equitable estoppel and veil piercing/alter ego.
[199]
3. In this reference, present Court is tasked to determine whether the Group
of Companies doctrine is in accord with the statutory regime of the Arbitration
and Conciliation Act, 1996, defining an arbitration agreement and parties
thereto. The adaptation of the doctrine has been doubted, and that is the
reason for this reference. It is necessary to entrench the doctrine within the
statutory regime of the Act, to enable a court or arbitral tribunal to apply it as
a principle to decipher the intention of the parties. Present Court find it
necessary to subsume the doctrine of Group of Companies within the judicial
process Under Section 7(4)(b), where a court or arbitral tribunal is called
upon to determine the existence of an arbitration agreement and parties to it.
[217]
4. A conjoint reading of Section 9 of the Code of Civil Procedure and Section
28 of the Indian Contract Act informs that the jurisdiction of an arbitral
tribunal to settle disputes between the parties, to the exclusion of ordinary
civil courts, must arise out of a contract to arbitrate between them. An
arbitration agreement, being a contract, must necessarily be in writing, 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. [218]
5. 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 record of
agreement to determine whether the non- signatory company is a party to it.
[219]
6. Although the application of the Group of Companies doctrine in India has
until now been independent of Section 7, its juxtaposition with Section 7(4)
(b) case-law shows that the inquiry under both is premised on determining
the mutual intention of parties to submit to arbitration. The mutual intention
of the parties is discernible from their conduct in the performance of the
contract and this inquiry is common to Section 7(4)(b) jurisprudence and the
Group of Companies doctrine. Even the precedents on the doctrine, national
and international, look to additional factors beyond the non-signatory being
in the same group of companies, such as commonality of subject-matter,
composite nature of transaction, and interdependence of the performance of
the contracts to determine mutual intent. [220]
7. Since the fundamental issue before the court or tribunal under Section 7(4)
(b) and the Group of Companies doctrine is the same, the doctrine can be
subsumed within Section 7(4)(b). Consequently, the record of agreement that
evidences conduct of the non-signatory in the formation, performance, and
termination of the contract and surrounding circumstances such as its direct
relationship with the signatory parties, commonality of subject-matter, and
composite nature of transaction, must be comprehensively used to ascertain
the existence of the arbitration agreement with the non-signatory. In this
inquiry, the fact of a non-signatory being a part of the same group of
companies will strengthen its conclusion. In this light, there is no difficulty in
applying the Group of Companies doctrine as it would be statutorily anchored
in Section 7 of the Act. [221]
8. An agreement to refer disputes to arbitration must be in a written form, as
against an oral agreement, but need not be signed by the parties. Under
Section 7(4)(b), a court or arbitral tribunal will determine whether a non-
signatory is a party to an arbitration agreement by interpreting the express
language employed by the parties in the record of agreement, coupled with
surrounding circumstances of 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. The Group of Companies doctrine is also premised on ascertaining
the intention of the non-signatory to be party to an arbitration agreement.
The doctrine requires the intention to be gathered from additional factors
such as direct relationship with the signatory parties, commonality of subject-
matter, composite nature of the transaction, and performance of the contract.
Since the purpose of inquiry by a court or arbitral tribunal under Section 7(4)
(b) and the Group of Companies doctrine is the same, the doctrine can be
subsumed within Section 7(4)(b) to enable a court or arbitral tribunal to
determine the true intention and consent of the non-signatory parties to refer
the matter to arbitration. The doctrine is subsumed within the statutory
regime of Section 7(4)(b) for the purpose of certainty and systematic
development of law. The expression "claiming through or under" in Sections 8
and 45 is intended to provide a derivative right; and it does not enable a non-
signatory to become a party to the arbitration agreement. The decision in
Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc. and Ors.
tracing the Group of Companies doctrine through the phrase "claiming
through or under" in Sections 8 and 45 is erroneous. The expression 'party' in
Section 2(1)(h) and Section 7 is distinct from "persons claiming through or
under them". [222]
JUDGMENT
Dr. D.Y. Chandrachud, C.J.I.
Table of Contents
A. The reference
B. Submissions
C. Legal background
i. India
a. Chloro Controls
b. Development of Law after Chloro Controls
ii. France - The Dow Chemicals case
iii. Switzerland
iv. England
v. Singapore
vi. United States of America
D. Arbitration Agreement
i. Consent as the basis for arbitration
ii. Parties to Arbitration Agreement
E. Group of Companies Doctrine
i. Separate legal personality
ii. Adopting a pragmatic approach to consent
iii. Group of companies doctrine - a fact based doctrine
iv. The determination of mutual intention
v. Threshold standard
F. The group of companies doctrine has independent existence
i. Party and Persons "claiming through or under" are different
ii. The approach adopted by this Court in Chloro Controls is Incorrect
iii. Power of the Courts to issue directions Under Section 9
G. The standard of determination at the referral stage - Sections 8 and 11
H. Conclusions
A. The reference
1 . More than a century ago, James Joyce published Ulysses. Joyce experimented with
the narrative technique by extensively using a stream of consciousness. In its modernist
narrative technique, Ulysses is feted by literary critics and novelists as a literary
masterpiece. Novelists such as Vladimir Nabokov and T.S. Elliot eulogized it as a divine
work of Article However, others such as Virginia Woolf and Aldous Huxley criticized the
novel for being technical and boring. Despite the varied criticism, the legacy of Ulysses
endures particularly because its experimental narrative technique challenged the
conventional literary style. Similar is the case of the group of companies doctrine - a
modern theory which challenges the conventional notions of arbitration law. It is
celebrated by some, reviled by many others. Yet, its legacy continues.
2 . Five judges of this Court are called upon to determine the validity of the 'Group of
Companies' doctrine in the jurisprudence of Indian arbitration. The doctrine provides
that an arbitration agreement which is entered into by a company within a group of
companies may bind non-signatory affiliates, if the circumstances are such as to
demonstrate the mutual intention of the parties to bind both signatories and non-
signatories. This doctrine is called into question purportedly on the ground that it
interferes with the established legal principles such as party autonomy, privity of
contract, and separate legal personality. The challenge before this Court is to figure out
whether there can be a reconciliation between the group of companies doctrine and well
settled legal principles of corporate law and contract law.
3. A Bench of three Judges of this Court, while considering an application Under Section
11(6) of the Arbitration Act and Conciliation 19961, sought to reexamine the validity of
the group of companies doctrine in the Indian context on the ground that it is premised
more on economic efficiency rather than law. The Bench of three judges (speaking
through the majority opinion authored by Chief Justice N.V. Ramana (as he was then),
and the concurring opinion by Justice Surya Kant) doubted the correctness of the
application of the doctrine by the Indian courts.
4. Chief Justice Ramana criticised the approach of a three-Judge Bench of this Court in
Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.
MANU/SC/0803/2012 : (2013) 1 SCC 641 of relying upon the phrase "claiming
through or under" in Section 45 of the Arbitration Act to adopt the group of companies
doctrine. He noted that the subsequent decisions of this Court established the doctrine
in Sections 8 and 35 without adequately examining the interpretation of the phrase
"claiming through or under" appearing in those provisions. These decisions include:
Cheran Properties Ltd. v. Kasturi and Sons Ltd. MANU/SC/0427/2018 : 2018:INSC:394
: (2018) 16 SCC 413, Mahanagar Telephone Nigam Ltd. v. Canara Bank
MANU/SC/1057/2019 : 2019:INSC:881 : (2020) 12 SCC 767, and Oil and Natural Gas
Corporation Ltd. v. Discovery Enterprises Pvt. Ltd. MANU/SC/0554/2022 :
2022:INSC:483 : (2022) 8 SCC 42. He also observed that economic concepts such as
tight group structure and single economic unit alone cannot be utilized to bind a non-
signatory to an arbitration agreement in the absence of an express consent.
Consequently, he referred the matter to the larger Bench to seek clarity on the
interpretation of the phrase "claiming through or under" appearing Under Sections 8,
35, and 45 of the Arbitration Act by formulating the following two questions:
a. Whether the phrase 'claiming through or under' in Sections 8 and 112 could
be interpreted to include the 'Group of Companies' doctrine; and
b. Whether the 'Group of Companies' doctrine as expounded by Chloro Controls
Case (supra) and subsequent judgments is valid in law.
5. In a concurring opinion, Justice Surya Kant observed that the decisions of this Court
before Chloro Controls (supra), rendered in Sukanya Holdings (P) Ltd. v. Jayesh H.
Pandya MANU/SC/0310/2003 : (2003) 5 SCC 531 and Indowind Energy Ltd. v.
Wescare (I) Ltd. MANU/SC/0300/2010 : (2010) 5 SCC 306, adopted a "rigid" and
"restrictive" approach by placing undue emphasis on formal consent. Justice Surya Kant
traced the evolution of the group of companies doctrine to observe it had gained a firm
footing in Indian jurisprudence. However, he opined that that this Court adopted
inconsistent approaches while applying the doctrine in India, which needed to be
clarified by a larger Bench. Accordingly, he highlighted the following questions of law
for determination by the larger Bench:
a. Whether the Group of Companies Doctrine should be read into Section 8 of
the Act or whether it can exist in Indian jurisprudence independent of any
statutory provision;
b. Whether the Group of Companies Doctrine should continue to be invoked on
the basis of the principle of 'single economic reality';
c. Whether the Group of Companies Doctrine should be construed as a means
of interpreting implied consent or intent to arbitrate between the parties; and
d. Whether the principles of alter ego and/or piercing the corporate veil can
alone justify pressing the Group of Companies Doctrine into operation even in
the absence of implied consent.
6. We are not reproducing the factual matrix of the case, as we have been called upon
to settle the broader legal issues raised in the reference. In the process, we will answer
the above legal issues, as well as other ancillary issues that have been raised before us
by counsel.
B. Submissions
7. Mr. Hiroo Advani, learned Counsel appearing for the Petitioner in Arbitration Petition
No. 38 of 2020, made the following submissions:
a. The basis for the application of the group of companies doctrine is the tacit
or implied consent by the non-signatory to be bound by the arbitration
agreement;
b. The definition of "party" Under Section 2(1)(h) of the Arbitration Act cannot
be restricted to the signatories to an arbitration agreement. The definition
should be read expansively to also include non-signatories depending upon the
facts and circumstances;
c. Section 7 of the Arbitration Act provides that the defined legal relationship
between the parties may be non-contractual as well. Moreover, Section 7(4)(b)
indicates that a non-signatory could be bound by an arbitration agreement if in
the course of a written communication, it has demonstrated an intention to be
bound by the agreement; and
d. The group of companies doctrine should ideally be applied by the arbitral
tribunal. At the stage of referral, the court should merely take a prima facie
view and leave it for the arbitral tribunal to determine the necessity of joining
the non-signatories to the arbitration agreement.
8 . Mr. Darius J. Khambata, learned Senior Counsel appearing for the Respondents in
SLP (C) No. 8607 of 2022, made the following submissions:
a. The applicability of the group of companies doctrine must be examined from
the touchstone of whether a non-signatory could be made a party to the
arbitration agreement. The expression "claiming through or under" a party
cannot be the basis to apply the doctrine;
 b. The doctrine is a consensual theory premised on the existence of a dispute
arising from a defined legal relationship and mutual intention of the parties to
be bound by the arbitration agreement. The intention of the non- signatory has
to be ascertained from the cumulative factors laid down in Chloro Controls
(supra);
c. The following requirements must be met for the application of the group of
companies doctrine to bind the non-signatory as a "veritable" party to the
arbitration agreement:
i. mutual intention of all the parties, both signatories and non-
signatories, to be bound by the arbitration agreement;
ii. absolute and unqualified acceptance by the non-signatory party to
the arbitration agreement; and
iii. such acceptance must either be expressed or implied. In the context
of a non-signatory, such acceptance will be implied and manifested in
the negotiation, performance, or termination of the contract;
d. Mutual consent of the parties to refer disputes arising out of their defined
legal relationship to arbitration is the essential ingredient of an arbitration
agreement. It would be against the concept of party autonomy to bind a non-
signatory to an arbitration agreement without ascertaining their consent;
e. The concept of "party" to an arbitration agreement is distinct from the
concept of "person claiming through or under" a party. The latter expression
conveys the notion of a derivative cause of action where the non-signatory
steps into the shoes of the party rather than claiming an independent right
under the agreement. The typical scenarios where a person claims through or
under a party are assignment, subrogation, and novation; and
f. Concepts such as 'tight group structure' and 'single economic unit' cannot be
the sole basis to invoke the group of companies doctrine. This doctrine cannot
be applied to bind a non-signatory merely on account of it being under the
ownership, control, or supervision of the signatory party;
9 . Dr. A.M. Singhvi, learned Senior Counsel appearing for the interveners in IA No.
92757 of 2022, made the following submissions:
a. The group of companies doctrine constitutes a true and genuine effectuation
of the real intent of the parties to subject both the signatory and non-signatory
parties to the arbitration agreement;
b. The doctrine is a reasonable and natural extension of the principle of
piercing the corporate veil. The application of the doctrine is also justified in
affixing responsibility when the requisite and sufficient degree of common
ownership and control exists;
c. The intention of the parties cannot be the only basis to join a non-signatory
party to an arbitration agreement. The court can also consider non- consensual
doctrines such as piercing the corporate veil, alter ego, or tight group structure;
and
d. The Arbitration Act does not prohibit or inhibit the adoption of the group of
 companies doctrine in Indian arbitration jurisprudence. On the contrary, Section
7 of the Arbitration Act provides an expansive concept of an arbitration
agreement. Moreover, the legislature specifically amended Section 8 of the
Arbitration Act by inserting the words "any person claiming through or under"
to recognize and codify the reality of non-signatories acting through or under
the signatory parties.
1 0 . Mr. Kapil Sibal, learned Senior Counsel appearing for the intervener in IA No.
56615 of 2023, made the following submissions:
a. A non-signatory can be impleaded in an arbitration proceeding provided:
(i) there is a defined legal relationship between the non-signatory and the
parties to the arbitration agreement; and (ii) the non-signatory consented to be
bound by the arbitration agreement in terms of Section 7 of the Arbitration Act;
b. The onus to prove the intention of the non-signatory to be bound by the
arbitration agreement lies on the party seeking to implead the non- signatory;
c. In view of the requirement Under Section 7 of the Arbitration Act, an
arbitration agreement has to be in writing and there cannot be an oral
agreement to arbitrate. Regardless, the intention of the non-signatory to be
bound by the arbitration agreement can be gathered from conduct;
d. Arbitration is in the realm of private law, and a matter of choice and intent of
the parties. Therefore, factors such as economic convenience, justice, or equity
cannot be grounds for binding non-signatories to an arbitration agreement; and
e. The cumulative factors laid down by this Court in Discovery Enterprises
(supra) cannot be considered in isolation, and must be applied holistically to
determine the applicability of the group of companies doctrine in a given factual
matrix.
11. Mr. Nakul Dewan, learned Senior Counsel appearing for the Respondent in SLP (C)
No. 8607 of 2022, made the following submissions:
a. The group of companies doctrine and single economic entity doctrine are
purely economic concepts without any basis in either contract law or company
law. Therefore, they cannot be applied to determine the intention of non-
signatories to be bound by an arbitration agreement;
b. The decision of a party to not sign the arbitration agreement may form the
basis to demonstrate an intent not to be bound by it;
c. The mere factum of multiple agreements or that the non-signatory was
involved in the negotiation of the contract cannot form the basis to bind it to
the arbitration agreement;
d. The phrase "claiming through or under" which finds mention Under Sections
8 and 45 of the Arbitration Act cannot be the basis for the application of the
group of companies doctrine; and
e. The determination of the intention of parties to a contract should relate only
to the intention held at the time of entering into the contract, which can be
gathered objectively from the text of the contract. However, Chloro Controls
 (supra) which considers consequential or subsequent agreements to determine
the mutual intention of the parties is incorrect.
12. Mr. Ritin Rai, learned Senior Counsel appearing for the Respondent in Arbitration
Petition No. 38 of 2020, made the following submissions:
a. Section 7 of the Arbitration Act requires the arbitration agreement to be in
writing. Therefore, an arbitration agreement cannot be created on the basis of
implied consent of the non-signatory;
b. Complex multi-party contracts are outcomes of detailed negotiations entered
into after parties have fully applied their mind. To impute intention to parties in
contradiction to the express terms of the agreement would defeat the purpose
of the parties' memorializing their understanding in a negotiated, written
document;
c. An arbitration agreement which sets out the executing parties and the arbitral
procedure agreed among them cannot be read to expand its reach to third
parties;
d. The group of companies doctrine cannot be traced to the phrase "claiming
through or under" as provided Under Sections 8 and 45 of the Arbitration Act;
and
e. Chloro Controls (supra) erroneously failed to consider whether an implied
consent derived from the conduct of a non-signatory satisfied the requirement
of a clear intention to arbitrate. Moreover, Chloro Controls (supra) wrongly held
that the courts have the discretion to refer non- signatory parties to arbitration
Under Sections 8 or 45 of the Arbitration Act in exceptional cases. The
introduction of such a discretion brings in uncertainty in the arbitration practice
in India.
13. Mr. Tushar Mehta, learned Solicitor General appearing on behalf of the Union of
India, made the following submissions:
a. Since India follows the UNCITRAL Model Law, concepts of 'commercial
element' and 'business prudence' have to be considered while interpreting the
provisions of the Arbitration Act;
b. The group of companies doctrine is inbuilt in the overall scheme of the
Arbitration Act. Section 7 uses the broad phrase "defined relationship whether
contractual or otherwise" to convey that an arbitration agreement is not
restricted to a conventional agreement;
c. The insertion of the words "claiming through or under" in Section 8 of the
Arbitration Act is merely in furtherance of the legislative intent to confer locus
on yet another category of persons to insist that the judicial authority must
refer the dispute before it to arbitration; and
d. If the referral court Under Sections 8 and 11 cannot prima facie determine
the issue of joinder of a non-signatory to the arbitration agreement on the basis
of the group of companies doctrine, it can refer the issue to be decided by the
arbitral tribunal.
14. Mr. Sanjoy Ghose, learned Senior Counsel appearing on behalf of the Petitioner in
SLP (C) No. 8607 of 2022, made the following submissions:
a. Section 2(1)(h) uses the term "party" and not "signatory" to account for
situations where a non-signatory enters the shoes of a signatory party either by
succession, operation of law, assignment, or death; and
b. The group of companies doctrine contravenes the provisions of corporate law
by fixing liability on an entity that is not a party to an arbitration agreement.
Mere participation in the negotiation or performance of the contract cannot bind
a non-signatory to the arbitration agreement in the absence of express consent.
15. Mr. Pallav Mongia, learned advocate on behalf of the interveners in IA No. 58168 of
2023, submitted that Section 2(1)(h) of the Arbitration Act does not restrict the
definition of parties to "signatories". Rather, the definition has to be inferred from
Section 7. Section 7(4) expands the definition of parties to non-signatories.
16. Ms. Meenakshi Arora, learned Senior Counsel on behalf of the Respondent in SLP
(C) No. 8607 of 2022, argued for de-tagging of SLP (C) No. 8607 of 2022 from the lead
matter, that is Arbitration Petition No. 38 of 2020, as the former deals with power of the
courts to issue directions Under Section 9 of the Arbitration Act against third parties.
Further, the learned Senior Counsel submitted that the courts can take aid of the group
of companies doctrine to issue interim directions against non-signatories to the
arbitration agreement.
17. The arguments advanced by advocates on both sides of the aisle indicate that this
Constitution Bench has been primarily called upon to determine the validity of the group
of companies doctrine in Indian arbitration jurisprudence. However, there are other
broad ancillary issues which have been raised by the learned Counsel. These include:
(i) whether the Arbitration Act allows joinder of a non-signatory as a party to an
arbitration agreement; and, (ii) whether Section 7 of the Arbitration Act allows for
determination of an intention to arbitrate on the basis of the conduct of the parties. This
Bench will address the issues arising out of the order of reference as well as the above-
mentioned ancillary issues in due course.
C. Legal background
i. India
18. Before the enactment of the Arbitration Act, the law on arbitration was substantially
contained in the Arbitration Act of 1940,3 the Arbitration (Protocol and Convention) Act
of 1937, and the Foreign Awards (Recognition and Enforcement) Act of 1961. In 1978,
the Law Commission of India suggested substantive amendments to the 1940 Act.
Moreover, the United Nations Commission on International Trade Law4 adopted the
Model Law on International Commercial Arbitration in 1985.5 The General Assembly of
the United Nations recommended all the Member States to adopt the UNCITRAL Model
Law in their domestic legislation with a view to uniformize the law of arbitral
procedures.6 The Arbitration Act was enacted to consolidate and amend the law relating
to arbitration. It brought the law relating to domestic and international commercial
arbitration in consonance with the UNCITRAL Model Law, the New York Convention, and
the Geneva Convention.
1 9 . Section 2(1)(h) of the Arbitration Act defines a "party" to mean "a party to an
arbitration agreement." An "arbitration agreement" is defined Under Section 2(1)(b) to
mean "an agreement referred to in Section 7." Section 7 lays down the essential
elements of a valid and binding arbitration agreement. It defines an arbitration
agreement as an agreement by the parties to submit to arbitration all or certain disputes
which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not. The provision also mandates that an arbitration
agreement shall be in writing. An arbitration agreement is in writing if it is contained in:
(a) a document signed by the parties;
(b) an exchange of letters, telexes, telegrams, or other means of
telecommunication including communication through electronic means which
provide a record of the agreement; or
(c) an exchange of statements of claim and defense in which the existence of
the agreement in alleged by one party and not denied by the other.
Section 7(5) further stipulates that the reference in a contract to a document containing
an arbitration Clause constitutes an arbitration agreement if two conditions are satisfied.
These conditions are first, that the contract is in writing; and second, that the reference
is such as to make the arbitration Clause part of the contract.
20. An arbitration agreement, being a creature of contract,7 is based on the consent of
parties to submit their disputes to an alternate dispute resolution mechanism. Generally,
a party to an arbitration agreement is determined on the basis of persons or entities
who are signatories to the arbitration agreement or the underlying contract containing
the arbitration agreement. However, over the past two decades the law on joinder of
non-signatory parties has evolved substantially. The evolution could roughly be
classified into two stages: before Chloro Controls (supra) and after Chloro Controls
(supra).
21. In the pre Chloro Controls (supra) era, this Court construed "parties" by limiting it
only to the signatories to the arbitration agreement. In Sukanya Holdings (supra) the
applicant filed an application Under Section 8 of the Arbitration Act before the High
Court and sought to enforce the arbitration agreement against both the signatories and
non-signatories to the agreement. The High Court rejected the application on the
ground that the non-signatories were not parties to the arbitration agreement. In
appeal, this Court upheld the decision of the High Court by observing that there is no
provision under the Arbitration Act stipulating what is required to be done where some
parties to the suit are not parties to the arbitration agreement. In Sumitomo Corporation
v. CDC Financial Services (Mauritius) Ltd. MANU/SC/1101/2008 : (2008) 4 SCC 91,
this Court, while dealing with an international commercial arbitration held that a "party"
to an arbitration agreement means a party to the judicial proceedings. This was
expressly held to be erroneous in Chloro Controls (supra), where it was held that
"party" has to be construed in view of Section 2(1)(h) to mean a party to an arbitration
agreement.
22. The interpretation of the expression "party" as defined Under Section 2(1)(h) came
up for the consideration of this Court in Indowind Energy Ltd. (supra). In that case, an
agreement of sale was entered into by the first and second Respondents. The agreement
described the second Respondent as the 'buyer' and promoter of Indowind, the non-
signatory. After a dispute arose, the first Respondent instituted an application Under
Section 11(6) of the Arbitration Act against the second Respondent and Indowind.
Indowind resisted the impleadment on the ground that it was not a party to the
underlying sale agreement and, therefore, had not consented to be bound by the
arbitration clause. The issue before this Court was whether the arbitration agreement
contained in the sale agreement was binding on Indowind. This Court refused to join
Indowind to the arbitration agreement on the ground that (i) Indowind was not a
signatory to the sale agreement; (ii) Indowind and the promoter company were two
independent companies with a separate and distinct legal existence; and (iii) the fact
that Indowind did not sign the sale agreement indicated that it was the mutual intention
of all the parties to not make it a party to the arbitration agreement.
2 3 . The pre Chloro Controls (supra) position was characterized by three underlying
precepts: (i) arbitration could be invoked at the instance of a signatory to the
arbitration agreement only in respect to disputes with another signatory party;8 (ii) the
court would adopt a strict interpretation of the provisions of the Arbitration Act,
particularly the unamended Section 8 which only allowed reference of "parties" to an
arbitration agreement; and (iii) there was an emphasis on formal consent of the parties,
thereby excluding any scope for implied consent of the non-signatories to be bound by
an arbitration agreement. This position of law underwent a significant change when a
Bench of three Judges of this Court in Chloro Controls (supra) allowed joinder of non-
signatory parties to the arbitration agreement on the basis of the group of companies
doctrine.
a. Chloro Controls
2 4 . In Chloro Controls (supra) 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 effective execution of the principal
agreement. In that case, a foreign entity and an Indian entity incorporated a joint
venture company to market and distribute chlorination equipment. With respect to the
joint venture, the related companies of both the Indian and foreign entity were also
involved. Consequently, the parties concluded several ancillary agreements such as a
Shareholders' Agreement which contained an arbitration clause. All the contracting
parties were not signatories to all the agreements, including the Shareholders'
Agreement. When disputes arose between the parties, the foreign entities sought to
terminate the joint venture. The Indian entity filed an application before the High Court
seeking a declaration to restrain the foreign entities from repudiating their obligations
under the agreements. In response, the foreign entities applied for referring the
disputes to arbitration in view of the fact that the agreements were binding on the non-
signatories because of the composite nature of the transaction. A Single Judge of the
High Court granted the application of the Indian entity, which was set aside by the
Division Bench of the High Court. The primary issue before this Court pertained to the
ambit and scope of Section 45 of the Arbitration Act. This Court framed the issue in the
following terms:
1.3. Whether in a case where multiple agreements are signed between different
parties and where some contain an arbitration Clause and others do not and
further the parties are not identically common in proceedings before the court
(in a suit) and the arbitration agreement, a reference of disputes as a whole or
in part can be made to the Arbitral Tribunal, more particularly, where the
parties to an action are claiming under or through a party to the arbitration
agreement
25. Section 45 of the Arbitration Act in its unamended form read as follows:
 45. Power of judicial authority to refer parties to arbitration.-
Notwithstanding anything contained in Part I or in the Code of Civil Procedure,
1908 (5 of 1908), a judicial authority, when seized of an action in a matter in
respect of which the parties have made an agreement referred to in Section 44,
shall, at the request of one of the parties or any person claiming
through or under him, refer the parties to arbitration, that the said
agreement is null and void, inoperative or incapable of being performed.
(emphasis supplied)
In view of the language of Section 45, this Court held that the expression "any person"
reflects a legislative intent of enlarging the scope beyond "parties" who are signatories
to the arbitration agreement to include non-signatories. However, the court noted that
such non-signatory parties are required to claim "through or under the signatory party."
Thus, this Court accepted that arbitration is possible between a signatory to an
arbitration agreement and a third party or non-signatory claiming through a party.
26. The next issue before this Court was to determine whether there was any legal
relationship between the signatory and the non-signatory for the latter to "claim
through or under" the former. The court noted that the group of companies doctrine has
been developed by courts and tribunals in the international context to bind a non-
signatory affiliate or sister concern within the same corporate group as the signatory
party, to an arbitration agreement provided there was a mutual intention of all the
parties. This Court emphasized that the "intention of the parties" is the underlying
principle for the application of the group of companies doctrine. It observed:
72. This evolves the principle that a non-signatory party could be subjected to
arbitration provided these transactions were with group of companies and there
was a clear intention of the parties to bind both, the signatory as well as the
non-signatory parties. In other words, "intention of the parties" is a very
significant feature which must be established before the scope of
arbitration can be said to include the signatory as well as the non-
signatory parties.
(emphasis supplied)
27. The court held that a non-signatory could be subjected to arbitration "without their
prior consent" in "exceptional cases" on the basis of four determinative factors:
(i) A direct relationship to the party which is a signatory to the arbitration
agreement;
(ii) A direct commonality of the subject-matter and the agreement between the
parties being a composite transaction;
(iii) The transaction being of a composite nature where performance of the
mother agreement may not be feasible without the aid, execution, and
performance of supplementary or ancillary agreements for achieving the
common object and collectively have a bearing on the dispute; and
(iv) A composite reference of such parties will serve the ends of justice.
2 8 . In Chloro Controls (supra), this Court acknowledged that cases of composite
transactions involving multi-party agreement give rise to peculiar challenges where
non-signatories may be implicated in the dispute because of their legal relationship and
involvement in the performance of contractual obligations. To remedy such situations, it
was held that the group of companies doctrine could be applied to systematically
evaluate the facts and circumstances to determine "a clear intention of the parties to
bind both, the signatory as well as the non-signatory parties" to the arbitration
agreement.
29. Chloro Controls (supra) was dealing with a situation where the success of the joint
venture agreement was dependent upon the fulfilment of all the ancillary agreements. In
this context, this Court observed that all the ancillary agreements were relatable to the
parent agreement and the ancillary agreements were intrinsically linked with each other,
to the extent that they could not be severed. This in the view of the court indicated the
intention of the parties to refer all disputes arising out of the parent agreement and
ancillary agreements to the arbitral tribunal.
3 0 . Furthermore, this Court explained the phrase "legal relationship" to mean the
relationship of the signatory party with the person claiming under or through them. It
observed that all the agreements were signed by "some parties or their holding
companies or the companies into which the signatory company had merged." Although
these companies did not put pen to paper for all the agreements, they were descendants
in interest or subsidiaries of the signatory parties and therefore would be covered under
the expression "claiming through or under" the parties to the agreement. In this context
the Court observed that being part of the same corporate group, the interests of the
non-signatory companies were not adverse to the interest of the principal company and
the joint venture company. Therefore, the group of companies doctrine formed the basis
for a non-signatory to claim through or under the signatory. Chloro Controls (supra)
laid down the ratio that a non-signatory person or entity could be made a party to an
arbitration agreement, as "claiming through or under" a signatory party, if the
circumstances demonstrate the mutual intention of the parties on the basis of the
composite nature of the transaction, direct commonality of subject-matter, and direct
relationship of the non-signatory to the signatory parties.
b. Development of Law after Chloro Controls
31. In the aftermath of Chloro Controls (supra), the Law Commission of India published
a Report in 2014 recommending amendments to the Arbitration Act. The Commission
observed that the phrase "claiming through or under" as used and understood in
Section 45 is absent in the corresponding provision of Section 8. To cure this anomaly,
it was suggested that the definition of "party" Under Section 2(1)(h) be amended to
also include the expression "a person claiming through or under such party." 9 In 2016,
the legislature amended Section 8 to bring it in line with Section 45 of the Arbitration
Act. The unamended Section 8(1) provided that a party to an arbitration agreement
could make an application seeking a reference to arbitration. The amended Section 8(1)
provided that "a party to an arbitration agreement or any person claiming through or
under him" could seek a reference to arbitration. However, the legislature did not bring
about any change in the language of Section 2(1)(h) or Section 7 of the Arbitration Act.
Since Chloro Controls (supra) and the amendment to Section 8, subsequent decisions of
this Court have referred to the group of companies doctrine to join non-signatories
persons or entities to arbitration agreements.
32. In Cheran Properties (supra), the issue before this Court was whether the arbitral
award could be enforced Under Section 35 of the Arbitration Act against a non-
signatory, who was a nominee of one of the signatories to the arbitration agreement
and a direct beneficiary of the underlying contract between the signatories. Section 35
of the Arbitration Act postulates that an arbitral award "shall be final and binding on the
parties and persons claiming under them respectively." This Court observed that the
expression "persons claiming under them" refers to every person whose capacity or
position is derived from and is same as a party to the proceedings. It held that the non-
signatory, being a nominee of one of the signatory parties, was bound by the arbitral
award as it was claiming under the signatory.
33. This Court in Cheran Properties (supra) interpreted the group of companies doctrine
to hold that its true purport is to enforce the common intention of the parties where the
circumstances indicate that both the signatories and non- signatories were intended to
be bound. One of us (D.Y. Chandrachud J.) explained the evolution of the group of
companies doctrine in the Indian context in the following terms:
23. As the law has evolved, it has recognised that modern business
transactions are often effectuated through multiple layers and agreements.
There may be transactions within a group of companies. The circumstances in
which they have entered into them may reflect an intention to bind both
signatory and non- signatory entities within the same group. In holding a non-
signatory bound by an arbitration agreement, the court approaches the matter
by attributing to the transactions a meaning consistent with the business sense
which was intended to be ascribed to them. Therefore, factors such as the
relationship of a non-signatory to a party which is a signatory to the
agreement, the commonality of subject-matter and the composite nature of the
transaction weigh in the balance. The group of companies doctrine is
essentially intended to facilitate the fulfilment of a mutually held
intent between the parties, where the circumstances indicate that the
intent was to bind both signatories and non-signatories. The effort is
to find the true essence of the business arrangement and to unravel
from a layered structure of commercial arrangements, an intent to
bind someone who is not formally a signatory but has assumed the
obligation to be bound by the actions of a signatory.
(emphasis supplied)
3 4 . The decision in Cheran Properties (supra) holds that the group of companies
doctrine is applied to bind a non-signatory party upon a construction of the arbitration
agreement, circumstances which exist at the time of entering into the contract, and the
performance of the underlying contract. Nevertheless, it must be noted that Cheran
Properties (supra) did not apply the group of companies doctrine to make the non-
signatory a party to the arbitration agreement. Rather, this Court made the arbitral
award binding on a non- signatory Under Section 35 on the ground that it was claiming
under a party which was a signatory to the arbitration agreement.
3 5 . In Ameet Lalchand Shah v. Rishabh Enterprises MANU/SC/0501/2018 :
2018:INSC:450 : (2018) 15 SCC 678, a two-Judge Bench of this Court was dealing with
an arbitral dispute arising out of four interconnected agreements executed towards a
single commercial project. The issue was whether the four agreements were
interconnected to refer all the parties to arbitration. In that case, all the parties were not
signatories to the main agreement containing the arbitration clause. This Court relied on
Chloro Controls (supra) to hold that a non-signatory, which is a party to an
interconnected agreement, would be bound by the arbitration Clause in the principal
agreement. It observed that in view of the composite nature of the transaction, the
disputes between the parties to various agreements could be resolved effectively by
referring all of them to arbitration.
36. Over time, this Court has identified certain additional factors for the invocation of
the group of companies doctrine. In Reckitt Benckiser (India) Private Limited v.
Reynders Label Printing India Private Limited MANU/SC/0859/2019 : 2019:INSC:700 :
(2019) 7 SCC 62, a two-Judge Bench of this Court was dealing with an application
Under Section 11(6) of the Arbitration Act seeking the appointment of an arbitrator.
This Court prima facie observed that the parties belonged to the same group of
companies. Subsequently, the issue before this Court was whether there was a clear
intention of the parties to bind both the signatory and non-signatory parties based on
their participation in the negotiation of the underlying contract. The court held that the
non-signatory party, even though a constituent part of the corporate group, did not
have "any causal connection with the process of negotiations preceding the agreement
or the execution thereof, whatsoever." Thus, the participation of the non-signatory party
in the negotiation and performance of the underlying contract was held to be the key
determinant of the intention of the parties to be bound by an arbitration agreement.
3 7 . In Canara Bank (supra), this Court emphasized that the group of companies
doctrine could be invoked on the basis of the principle of "single economic unit". In that
case, the facts were that Canbank Financial Services Ltd.10, a wholly owned subsidiary
of Canara Bank, subscribed to the bonds floated by MTNL. CANFINA subsequently
transferred the bonds to Canara Bank. Eventually, MTNL cancelled the bonds which gave
rise to the dispute between the parties. Canara Bank filed a writ petition before the
Delhi High Court challenging the cancellation of bonds by MTNL. The High Court
referred the parties to arbitration, but Canara Bank challenged the impleadment of
CANFINA. This Court dismissed Canara Bank's objection on the ground that CANFINA
was a necessary and proper party to the arbitral proceedings, being the original
purchaser to the bonds. While dealing with the contours of the group of companies
doctrine, this Court noted that the doctrine could also be invoked "in cases where there
is a tight group structure with strong organizational and financial links, so as to
constitute a single economic unit, or a single economic reality."
38. The last in the series of decisions dealing with the group of companies doctrine is a
three-Judge Bench decision of this Court in Discovery Enterprises (supra). In that case,
ONGC entered into a contract with Discovery Enterprises for operating a shipping
vessel. After a dispute arose between the parties, ONGC invoked the arbitration Clause
in the contract against Discovery Enterprises and Jindal Drilling and Industries Ltd., a
sister company of Discovery Enterprises. The arbitral tribunal refused to proceed with
the claim against Jindal Drilling and Industries Ltd. on the ground that it was not a
signatory to the arbitration agreement. In an appeal filed by ONGC Under Section 37 of
the Arbitration Act, the High Court upheld the decision of the tribunal. The High Court's
decision was challenged before this Court Under Article 136 of the Constitution. This
Court cited Chloro Controls (supra) and the subsequent decisions with approval to
emphasize that the group of companies doctrine can be applied to bind a company
within a group which is not a signatory to the arbitration agreement. The Court held
that in addition to the cumulative factors laid down in Chloro Controls (supra), the
performance of the contract was also an essential factor to be considered by the courts
and tribunals to bind a non-signatory to the arbitration agreement. Ultimately, this
Court set aside the decision of the arbitral tribunal on the ground that it failed to
address the plea raised by ONGC, and remanded the matter back to the tribunal to
decide afresh.
ii. France - The Dow Chemicals case
3 9 . The application of the group of companies doctrine in arbitration law mainly
originated from the decisions rendered by international arbitral tribunals. Before
proceeding to analyze the contours of the doctrine, it is necessary to understand its
origin and development in the international context. Such an analysis is particularly
relevant because any authoritative determination by this Court with regard to the group
of companies doctrine ought to be in tune with the internationally accepted principles
on the vexed issue of joining non- signatories to arbitration agreements.
40. The origin of the doctrine is primarily attributed to a number of arbitration awards
rendered mainly in France. The most prominent among them remains an interim award
delivered more than four decades ago by an ICC tribunal in Case No. 4131,11 more
popularly known as the Dow Chemicals case. In that case, Dow Chemical (Venezuela)
entered into a contract with a French company, which later assigned the rights to Isover
Saint Gobain, for distribution of thermal isolation products in France. Dow Chemical
(Venezuela) subsequently assigned the contract to Dow Chemical AG, which was a
subsidiary of Dow Chemical Company - the holding company. Thereafter, Dow Chemical
Europe, a subsidiary of Dow Chemical AG, entered into a similar contract with three
companies, which subsequently assigned the contract to Isover Saint Gobain. Both
contracts provided that the deliveries of products to the distributors will be made by
Dow Chemical France, or any other subsidiary of Dow Chemical Company. Several suits
were instituted against the companies of the Dow Chemical group before the French
courts. In response, the four companies of the Dow Chemical group (the two formal
parties to the contract - Dow Chemical AG and Dow Chemical Europe, and the two non-
signatories - Dow Chemical Company and Dow Chemical France) instituted arbitral
proceedings against Isover Saint Gobain before the ICC tribunal.
41. The primary issue before the ICC tribunal was to determine its own jurisdiction over
the non-signatory parties. The tribunal sought to determine whether there existed a
common intention of the parties to be bound by the arbitration agreement. The tribunal
established the common intention of the parties by analyzing the factual circumstances
underpinning the negotiation, performance, and termination of the contracts. The
tribunal held that Dow Chemical France "was a party" to the two contracts, and
consequently to the arbitration agreements contained in them, because it played a
preponderant role in the negotiation, performance, and termination of the contract. As
for Dow Chemical Company, the tribunal held that the holding company had ownership
of the trademarks under which the products were marketed in France and had absolute
control over its subsidiaries who were involved in the negotiation, performance, and
termination of the two contracts. The tribunal also relied on the fact that Isover Saint
Gobain applied for the joinder of the holding company into the court proceedings in
France before the Court of Appeal of Paris.
4 2 . After concluding that the non-signatories were also a party to the arbitration
agreement, the tribunal proceeded to analyze the factual circumstances of the signatory
and non-signatory belonging to the same group of companies. At the outset, the
tribunal observed that a group of companies constitutes one and the same economic
reality. However, the tribunal emphasized that a non- signatory may be bound by the
arbitration agreement entered into by another entity of the same group if the non-
signatory appears to be a veritable party to the contracts on the basis of their
involvement in the negotiation, performance, and termination of the contracts. The
relevant observation is extracted below:
Considering, in particular, that the arbitration Clause expressly accepted by
certain of the companies of the group should bind the other companies which,
by virtue of their role in their conclusion, performance, or termination of the
 contracts containing said clause, and in accordance with the mutual intention of
all parties to the proceedings, appear to have been veritable parties to these
contracts or to have been principally concerned by them and the disputes to
which they may give rise.
43. In Dow Chemical (supra), the arbitral tribunal did not base its decision to extend
the arbitration agreement to non-signatories solely on the fact that both the signatory
and non-signatory parties were members of the same group. The tribunal emphasized
the importance of determining the true parties to the arbitration agreement on the basis
of their participation in the negotiation, performance, and termination of the agreement.
The Dow Chemical case has been regarded as being instrumental in the transition from
a restrictive interpretation of consent focusing only on its express manifestation to a
more flexible approach attaching necessary relevance to implied consent to be bound by
the arbitration agreement.12
44. In a series of subsequent rulings, the Court of Appeal of Paris acknowledged the
extension of an arbitration agreement to non-signatories provided there was common
intention of all the parties. According to the Court of Appeal, the common intention may
be ascertained from the active role played by the non-signatories in the performance of
the contract containing the arbitration agreement, which gives rise to the presumption
that the non-signatory had knowledge of the arbitration agreement.13
45. The French law has been succinctly summarized in an unpublished ICC award in
case No. 11405 of 2001 in the following terms:
[t]here is no general rule, in French international arbitration law, that would
provide that non-signatory parties members of a same group of companies
would be bound by an arbitration clause, whether always or in determined
circumstances. What is relevant is whether all parties intended non-signatory
parties to be bound by the arbitration clause. Not only the signatory parties, but
also the non- signatory parties should have intended (or led the other parties to
reasonably believe that they intended) to be bound by the arbitration clause.14
Hence our understanding of the position in French law is that an arbitration agreement
can be extended to non-signatory parties if all the parties to the arbitration agreement
had a common intention to be bound by the agreement. The subjective intention of the
parties is to be inferred on the basis of their objective conduct during the negotiation,
performance, and termination of the underlying contract containing the arbitration
agreement.
iii. Switzerland
4 6 . Section 178(1) of the Swiss Private International Law Act 1987 states that an
"arbitration agreement must be made in writing or any other means of communication
allowing it to be evidenced by text." In 2003, the Swiss Federal Supreme Court held
that once there is a valid arbitration Clause according to Section 178(1) of the Swiss
Act, the issue whether it also extends to non-signatories may be decided by the courts
or the arbitral tribunals. As a matter of general rule, the Swiss courts have extended an
arbitration agreement to non-signatories typically in cases of assignment of a claim,
assumption of debt or delegation of a contract.15
47. In a decision rendered in 1996, the Swiss Federal Supreme Court held that the fact
that a non-signatory party belonged to the same group of companies as the signatory
party to the arbitration agreement was not a sufficient justification for binding the non-
signatory to the arbitration agreement.16 However, the Swiss Courts are not averse to
extending an arbitration agreement to non-signatory parties if there is an independent
and formally valid manifestation of consent of the non-signatory party to the arbitration
agreement.
48. In Swiss law, the consent of the parties to be bound by an arbitration agreement
may be express or implied by conduct. In a 2008 decision, the Swiss Federal Court held
that certain behavior or conduct may substitute compliance with a formal requirement of
an arbitration agreement.17 To determine the implied consent, it was held that the
courts or tribunals may take into consideration the fact whether the non-signatory party
was involved in the negotiation and performance of the contract, and thereby expressed
its willingness to be bound by the arbitration agreement.18 Thus, the subjective element
of willingness to be bound by an arbitration agreement ought to be expressed through
an objective element in the form of negotiation or performance of the contract.
iv. England
49. The English courts have generally taken a conservative approach to binding non-
signatory parties to arbitration agreements. Section 82(2) of the English Arbitration Act
1996 defines a "party to arbitration agreement" to include "any person claiming under
or through a party to the agreement." The English law envisages that even non-
signatory parties may be bound by an arbitration agreement but only if they are
claiming under or through the original party to the agreement. The English courts have
adopted an approach which favors a strict adherence to the doctrine of privity. Under
English law, an arbitration agreement is extended to non-signatory parties on the basis
of traditional contractual principles and doctrines such as agency, novation, assignment,
operation of law, and merger and succession. 19 However, the English law has explicitly
rejected other doctrines such as piercing the corporate veil, equitable estoppel, and
group of companies as a basis for extending an arbitration agreement to non-signatory
parties.
50. In Peterson Farms INC v. C & M Farming Limited MANU/UKCM/0010/2004 : [2004]
EWHC 121 (Comm), a claim for damages was brought against Peterson Farms by the
Respondent C & M Farming for damages suffered by several C & M group entities, some
of them being non- signatories to the arbitration agreement. The arbitral tribunal
applied the group of companies doctrine to hold that C & M Farming contracted on
behalf of the entire C & M group entities, and therefore was entitled to claim all the
damages suffered by the C & M group entities arising out of the contractual relationship
with Peterson. In appeal, the Commercial Court held that the chosen proper law of the
Agreement - Arkansas law - is similar to the English law which excludes the application
of the group of companies doctrine. Thus, the English law does not favor the application
of the group of companies doctrine for extending an arbitration agreement to non-
signatory parties.
51. The English precedents have also dealt with the meaning of the phrase "claiming
through or under", which was referred to by this Court in Chloro Controls (supra). In
Roussel-Uclaf v. G.D. Searle and Co. Ltd. [1978] 1 Lloyd's Rep, the issue before the
Court of Chancery Division was whether a wholly owned subsidiary company could
claim to be a party to an arbitration agreement between the parent company and a third
party. The Court was called upon to interpret Section 1 of the Arbitration Act of 1975
which allowed any party to an arbitration agreement "or any person claiming through or
under him" to apply to a court to stay proceedings where an arbitration agreement
existed. It was held that the subsidiary can claim the benefit of the arbitration
agreement because the parent company and the subsidiary were "so closely related"
that it could be said that the subsidiary was "claiming through or under" the parent
company. In City of London v. Sancheti,20 the Court of Appeal overturned Roussel-Uclaf
(supra) on the ground that an entity cannot be considered to be claiming through or
under merely because there is a "legal or commercial connection" between them.
52. Section 5 of the English Arbitration Act, 1996 requires an arbitration agreement to
be in writing. Further, Section 5(2)(a) provides that it is not necessary for the parties to
sign the arbitration agreement. In such situations, the critical question that arises
before the English courts is whether a non- signatory party is bound by an arbitration
agreement. The English law position is that "contracts are not to be lightly implied" and
the court "must be able to conclude with confidence both that the parties intended to
create contractual relations and that the agreement was to the effect contended for." 21
However, in limited situations, a contract is implied if the parties conducted themselves
in a manner as if they have formally entered into a contract.22
53. In Dallah Real Estate and Tourism Holding Co. v. The Ministry of Religious Affairs,
Government of Pakistan MANU/UKSC/0075/2010 : [2010] UKSC 46, the Government of
Pakistan entered into a Memorandum of Understanding with Dallah Real Estate and
Tourism Holding Co.23 for construction of housing facilities in Mecca, Saudi Arabia.
Subsequently, an agreement was executed between Dallah and the Awami Hajj Trust,
which was established by the Government through an Ordinance. However, the trust
ceased to exist as a legal entity because the Ordinance was not laid before Parliament
and no further ordinance was promulgated. Dallah commenced arbitral proceedings
against the Government. The UK Supreme Court had to determine whether there was a
common intention on behalf of the Government and Dallah to make the former a party
to the agreement. The Court observed that the "common intention of the parties means
their subjective intention derived from the objective evidence." It was held that there
was no evidence to conclude that the Government's behavior showed that it always
considered itself to be a true party to the agreement.
v. Singapore
5 4 . In Manuchar Steel Hong Kong Limited v. Star Pacific Line Pte Ltd.
MANU/SGHC/0182/2014 : [2014] SGHC 181, the Singapore High Court expressly
rejected the group of companies doctrine to bind non-signatories to arbitration
agreement. The High Court reasoned that the group of companies doctrine was: first,
anathema to the logic of consensual basis of an agreement to arbitrate; and second,
ordering of companies within a broader group did not mean one could dispense with
separate legal entity. The Singapore High Court relied on position of law taken in
Peterson Farms INC (supra) to observe that enforceable obligations cannot be imposed
on "strangers" to an arbitration agreement.
vi. United States of America
55. The Federal Arbitration Act is silent on the aspect of the joinder of non- signatory
parties to the arbitration agreement. Nevertheless, the US courts have often used the
general principles of contract law such as incorporation by reference, assumption,
agency, veil piercing or alter ego, and estoppel for binding non-signatories to
arbitration agreements.24 Although the United States follow a pro-arbitration policy, an
important issue that often comes up for deliberation is whether the domestic doctrines
could be applied for binding non-signatories in cases of international arbitration.
56. In G E Energy Power Conversion France SAS v. Outokumpu Stainless140 S. Ct.
1637 (2020), the issue before the United States Supreme Court was whether the New
York Convention precludes a non-signatory to an international arbitration agreement
from compelling arbitration by invoking domestic doctrines such as equitable estoppel.
In that case, the Eleventh Circuit Court refused to apply the domestic doctrine of
equitable estoppel on the ground that it conflicts with the signature requirements under
the New York Convention. The Circuit Court observed that Article II of the New York
Convention contains a strict requirement that the parties "actually sign" the arbitration
agreement in order to compel the parties to arbitration. The US Supreme Court held that
the Article II of the New York Convention does not restrict the contracting states from
applying domestic law to refer parties to arbitration agreements. Moreover, it was
observed that "the provisions of Article II contemplate the use of domestic doctrines to
fill gaps in the Convention." Thus, it was held that the New York Convention does not
set out a comprehensive regime to preclude the use of domestic law to enforce
arbitration agreements.
57. Unlike the English courts, the US Courts have used non-consensual doctrines to
extend arbitration agreements to non-signatory parties. For instance, the US Courts
have pierced the corporate veil and held the alter ego liable in exceptional
circumstances where the parent company exercised complete control over the subsidiary
with respect to the transaction at issue.25 Similarly, the doctrine of arbitral estoppel has
been developed by the US Courts to bind non-signatory parties to an arbitration
agreement. The doctrine of arbitral estoppel suggests that a party is estopped from
denying its obligation to arbitrate when it received a 'direct benefit' from a contract
containing an arbitration agreement.26 The second type of arbitral estoppel developed
by the US courts places emphasis on the substantial interdependent relationship
between the signatory and non-signatory party. 27 In a situation where claims of
concerted misconduct were raised against both the signatory and non- signatory to the
contract, the courts have resorted to the doctrine of equitable estoppel to further the
policy of pro-arbitration.28
58. The above discussion shows that international jurisdictions, in some form or the
other, have moved beyond the formalistic requirement of consent to bind a non-
signatory to an arbitration agreement. The primary conclusion is that the issue of
binding a non-signatory to an arbitration agreement is more of a fact-specific aspect.29
In jurisdictions such as France and Switzerland, there is a broad consensus that consent
or subjective intention of a non-signatory to arbitrate may be proved by conduct. Such
subjective intention could be derived from the objective evidence in the form of
participation of the non- signatory in the negotiation, performance, or termination of
the underlying contract containing the arbitration agreement. However, the group of
companies doctrine has not been universally accepted by all jurisdictions.
In jurisdictions such as France where the doctrine has gained acceptance, group of
companies is one of the several factors that a court or tribunal considers to determine
the mutual intention of all the parties to join the non- signatory to the arbitration
agreement. Keeping in mind the above background, we now move on to analyze the
applicability of the group of companies doctrine in the Indian context.
D. Arbitration Agreement
i. Consent as the basis for arbitration
5 9 . Arbitration is an alternative dispute resolution mechanism where parties
consensually decide to submit a dispute between them to an arbitral tribunal to the
exclusion of domestic courts.30 Arbitration provides a neutral, efficient, and expert
process for dispute resolution at a single forum whose decision is final and binding on
the parties. The principle of party autonomy underpins the arbitration process as it
allows the parties to dispense with technical formalities and agree upon substantive and
procedural laws and Rules applicable to the merits of the dispute.31 Party autonomy
allows the parties to choose the seat of arbitration, number of arbitrators, procedure for
appointment of arbitrators, Rules governing the arbitral procedure, and the institution
which will administer the arbitration. An arbitration proceeding is broadly divided into
two stages: The first stage commences with an arbitration agreement and ends with the
making of an arbitral award. The second stage pertains to the enforcement of the
arbitral award.32
60. Consent forms the cornerstone of arbitration. An arbitration agreement records the
consent of the parties to submit their disputes to arbitration. A two- Judge Bench of this
Court in Bihar State Mineral Development Corporation v. Encon Builders (I) Pvt. Ltd.
MANU/SC/0611/2003 : (2003) 7 SCC 418 laid down four essential elements of an
arbitration agreement:
(i) There must be a present or a future difference in connection with some
contemplated affair
(ii) The parties must intend to settle such difference by a private tribunal
(iii) The parties must agree in writing to be bound by the decision of such
tribunal.
(iv) The parties must be ad idem.
61. An arbitration agreement is a contractual undertaking by two or more parties to
resolve their disputes by the process of arbitration, even if the disputes themselves are
not based on contractual obligations. An arbitration agreement is a conclusive proof that
the parties have consented to submit their dispute to an arbitral tribunal to the
exclusion of domestic courts. The basis for an arbitration agreement is generally traced
to the contractual freedom of parties to codify their intention to consensually submit
their disputes to an alternative dispute resolution process.
62. According to Section 10 of the Code of Civil Procedure of 1908, the courts have
jurisdiction to try all suits of a civil nature except suits whose cognizance is expressly
or impliedly barred. The said provision gives a right to any person to file a civil suit
before a court of competent jurisdiction. Moreover, Section 28 of the Indian Contract
Act of 187233 provides that any agreement restraining a party from enforcing their
rights under a contract before courts or tribunals is void to that extent. However, the
provision specifically saves a contract by which two or more persons agree that any
dispute, which may arise between them, in respect of any subject or class of subjects
shall be referred to arbitration. Thus, arbitration agreements are granted a statutory
exception Under Section 28 of the Contract Act. In Dhulabhai v. State of Madhya
Pradesh a Constitution Bench of this Court held that the jurisdiction of civil courts may
be excluded by an express provision of law or by clear intendment arising from such
law.34 In Chloro Controls (supra), this Court observed that Section 45 of the Arbitration
Act shall prevail over the provisions of the Code of Civil Procedure, 1908 in case of a
valid arbitration agreement. Considering the fact that an arbitration agreement excludes
the jurisdiction of civil courts, such an agreement ought to be valid and enforceable.
63. An arbitration agreement must satisfy the principles of contract law laid down under
the Contract Act, in addition to satisfying other requirements stipulated Under Section 7
of the Arbitration Act, to qualify as a valid agreement.35 Section 2(e) of the Contract Act
defines an agreement as every promise and every set of promises forming the
consideration for each other. An agreement enforceable by law is a contract. An
agreement should satisfy the mandate of Section 10 of the Contract Act to be
enforceable by law. Section 10 provides that all agreements are contracts if they are
made by the free consent of parties competent to contract, for a lawful consideration
and with a lawful object. According to Section 13, two or more persons are said to
consent when they agree upon the same thing in the same sense. Thus, consensus ad
idem between the parties forms the essential basis to constitute a valid arbitration
agreement.
6 4 . Being a creature of a contract, an arbitration agreement is also bound by the
general principles of contract law, including the doctrine of privity. The doctrine of
privity means that a contract cannot confer rights or impose liabilities on any person
except the parties to the contract. This doctrine has two aspects: first, only the parties
to the contract are entitled under it or bound by it; and second, the parties to the
contract cannot impose a liability on a third party. As a corollary, a third party cannot
acquire rights and entitlements under a contract. In M.C. Chacko v. State Bank of
Travancore, this Court held it as a settled principle of law that a person who is not
party to a contract cannot enforce the terms of the contract, subject to certain well-
recognised exceptions such as trust, family arrangement, and assignment.36 The
principle that only the parties to an arbitration agreement are either bound or benefited
by such an agreement is fundamental to arbitration.37 This principle is uniformly
reflected in international arbitration conventions as well as the Arbitration Act. For
instance, Section 7 of the UNCITRAL Model Law defines an arbitration agreement as "an
agreement by the parties to submit to arbitration all or certain disputes which have
arisen or which may arise between them in respect of a defined legal relationship,
whether contractual or not." (emphasis supplied)
65. It is a generally accepted legal proposition that arbitration is a matter of contract
and a party cannot be required to submit to arbitration any dispute which they have not
agreed so to submit.38 Since consent forms the cornerstone of arbitration, a non-
signatory cannot be forcibly made a "party" to an arbitration agreement as doing so
would violate the sacrosanct principles of privity of contract and party autonomy.
However, In case of multi- party contracts, the courts and tribunals are often called
upon to determine the parties to an arbitration agreement.
ii. Parties to Arbitration Agreement
66. The general method to figure out the parties to an arbitration agreement is to look
for the entities who are named in the recitals and have signed the agreement. The
signature of a party on the agreement is the most profound expression of the consent of
a person or entity to submit to the jurisdiction of an arbitral tribunal. However, the
corollary that persons or entities who have not signed the agreement are not bound by
it may not always be correct. A written contract does not necessarily require that parties
put their signatures to the document embodying the terms of the agreement.39
Therefore, the term "non-signatories", instead of the traditional "third parties", seems
the most suitable to describe situations where consent to arbitration is expressed
through means other than signature. A non-signatory is a person or entity that is
implicated in a dispute which is the subject matter of an arbitration, although it has not
formally entered into an arbitration agreement.40 The important determination is
whether such a non-signatory intended to effect legal relations with the signatory
parties and be bound by the arbitration agreement. There may arise situations where
persons or entities who have not formally signed the arbitration agreement or the
underlying contract containing the arbitration agreement may intend to be bound by the
terms of the agreement. In other words, the issue of who is a "party" to an arbitration
agreement is primarily an issue of consent.
67. Section 2 of the Contract Act provides that when a person signifies their willingness
to do or to abstain from doing anything, with a view to obtaining the assent of that
other to such act or abstinence, is said to make a proposal. The proposal is said to be
accepted when the person to whom the proposal is made signifies their assent. A
proposal becomes promise upon acceptance. Every promise and every set of promises,
forming the consideration for each other, is an agreement. Importantly, Section 9
provides that a promise is said to be express if the proposal or acceptance of any
promise is made in words, while a promise is said to be implied if such proposal or
acceptance is "made otherwise than in words." Thus, a contract may either be express
or implied.
68. Chitty on Contracts explains the difference between express and implied contracts
as follows:
Contracts may either be express or implied. The difference is not one of legal
effect but simply of the way in which the consent of the parties is manifested.
Contracts are express when their terms are stated in words by the parties. They
are often said to be implied when their terms are not so stated, as, for example,
when a passenger is permitted to board a bus: from the conduct of the parties
the law implies a promise by the passenger to pay the fare, and a promise by
the operator of the bus to carry him safely to his destination.[...] Express and
implied contracts are both contracts in the true sense of the term, for they both
arise from the agreement of the parties, though in one case the agreement is
manifested in words and in the other case by conduct. Since, as we have seen,
agreement is not a mental state but an act, an inference from conduct, and
since many of the terms of an express contract are often implied, it follows that
the distinction between express and implied contracts has little importance.41
69. The above exposition gives rise to the inference that in case of an implied contract,
the question revolves around the determination of the consent of the parties to be
bound by the terms of the contract. Such determination is manifested through the acts
or conduct. The theory of implied contract by conduct has also been accepted by this
Court. In Haji Mohammed Ishaq v. Mohamad Iqbal MANU/SC/0032/1978 : (1978) 2
SCC 493, the Plaintiff supplied tobacco to the Defendant. Although there was no express
agreement between the parties, the Defendant accepted the goods, but allegedly failed
to clear the outstanding dues despite repeated demands raised by the Plaintiff. A Bench
of three Judges of this Court observed that the conduct of the Defendants in accepting
the goods and not repudiating any of the demand letters raised by the Plaintiff "clearly
showed that a direct contract which in law is called an implied contract by conduct was
brough about between them." Under the Indian contract law, it is posited that actions or
conduct can be an indicator of consent of a party to be bound by a contract. This also
applies to an arbitration agreement considering the fact that it is a creature of contract.
However, an arbitration agreement also has to meet the requirements laid down under
the Arbitration Act to be valid and enforceable.
7 0 . Section 2(h) of the Arbitration Act defines a "party" to mean a party to an
arbitration agreement. Section 7 defines an arbitration agreement to mean an
agreement by the parties to submit to arbitration all or certain disputes which have
arisen or which may arise between them in respect of a "defined legal relationship."
Section 7 requires that an arbitration agreement has to be in writing. Section 7 indicates
the circumstances in which it is regarded as an agreement 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.
I n Vidya Drolia v. Durga Trading Corporation MANU/SC/0939/2020 :
2020:INSC:697 : (2021) 2 SCC 1, 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.
This approach is in line with the observations of Lord Hoffman in Fiona Trust and
Holding Co. v. Privalov where it was observed that "the construction of an arbitration
Clause should start from the assumption that the parties, as rational businessmen, are
likely to have intended any dispute arising out of the relationship into which they have
entered or purported to enter to be decided by the same tribunal."42 (emphasis
supplied)
71. Section 7(3) requires an arbitration agreement to be in writing. Section 7(4) lays
down three circumstances to elaborate when an arbitration agreement can be said to be
in writing. According to the first circumstance laid down Under Section 7(4)(a), an
arbitration agreement is in writing if it is signed by the parties. This circumstance refers
to a situation where the parties have formally executed and expressly assumed the
status of parties by attesting their signatures to the arbitration agreement or the
underlying contract containing the arbitration agreement. In such situations, the courts
or tribunals only need to refer to the signature page or the recitals to figure out the
parties to the arbitration agreement.
7 2 . 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 of the agreement. According to this provision,
the existence of an arbitration agreement can be inferred from various documents duly
approved by the parties.43 Section 7(4)(b) dispenses with the conventional sense of an
agreement as a document with signatories. Rather, it emphasizes on the manifestation
of the consent of persons or entities through their actions of exchanging documents.
However, the important aspect of the said provision lies in the fact that the parties
should be able to record their agreement through a documentary record of evidence. In
Great Offshore Ltd. v. Iranian Offshore Engineering and Construction Co., this Court
observed that Section 7(4)(b) requires the court to ask whether a record of agreement
is found in the exchange of letters, telex, telegrams, or other means of
telecommunication.44 Thus, the act of agreeing by the persons or entities has to be
inferred or derived by the courts or tribunals from the relevant documents and
communication, neither of which can be equated with a conventional contract.
73. The third circumstance is provided Under Section 7(4)(c), according to which an
arbitration agreement is in writing if it is contained in an exchange of statements of
claim and defence in which the existence of the agreement is alleged by one party and
not denied by the other. A two-Judge Bench of this Court clarified in S.N. Prasad v.
Monnet Finance Limited MANU/SC/0881/2010 : (2011) 1 SCC 320 that there will be an
"exchange of statements of claim and defence" for the purposes of Section 7(4)(c) if
there is an assertion of the existence of an arbitration agreement in any suit, petition or
application filed before any court or tribunal, and if there is no denial of it in the
defence, counter, or written statement. Thus, in the third circumstance the court
proceeds on the assumption that the conduct of the person or entity in not denying the
existence of an arbitration agreement leads to the conclusive proof of its existence. 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 consented to enter into the legal relationship by the dint of their action
or conduct.
75. The second aspect is contained in Section 7(3) which stipulates the requirement of
a written arbitration agreement. A written arbitration agreement need not be signed by
the parties if there is a record of agreement.45 The mandatory requirement of a written
arbitration agreement is merely to ensure that there is a clearly established record of
the consent of the parties to refer their disputes to arbitration to the exclusion of the
domestic courts.
76. Section 2(h) read with Section 7 does not expressly require the "party" to be a
signatory to an arbitration agreement or the underlying contract containing the
arbitration agreement. This interpretation is in line with the general trend in national
and international legislations that a signature is not necessary for an arbitration
agreement. The UNCITRAL Model Law as amended in 2006 lays down the writing
requirement for an arbitration agreement Under Article 7 in the following terms:
(3) An arbitration agreement is in writing if its content is recorded in any form,
whether or not the arbitration agreement or contract has been concluded orally,
by conduct, or by other means.
The above provision states that an arbitration agreement may be entered into in any
form, for example orally or tacitly, as long as the content of the agreement is recorded.
It eliminates the requirement of the signature of parties or an exchange of messages
between the parties.
77. Article II paragraph 2 of the New York Convention defines "agreement in writing" to
include an arbitral Clause in a contract or an arbitration agreement, signed by the
parties or contained in an exchange of letters or telegrams. Article 7 of the UNCITRAL
Model Law establishes a more favourable requirement for a written arbitration
agreement. In 2006, UNCITRAL recommended that the circumstances described in
Article II paragraph 2 of the New York Convention "be applied recognizing that the
circumstances described therein are not exhaustive."46 Additionally, it also
recommended that Article 7 paragraph 1 of the UNCITRAL Model Law should be applied
"to allow any interested party to avail itself of rights it may have, under the law or
treaties of the country where an arbitration agreement is sought to be relied upon, to
seek recognition of the validity of such an arbitration agreement." The Arbitration Act is
largely based on the UNCITRAL Model Law. Therefore, the UNCITRAL Model Law could
be referred to while construing the provisions of the Arbitration Act.47 Although the
amended Section 7 of the UNCITRAL Model Law has not been adopted in the Indian law,
it reflects the modern commercial reality where substance is given precedence over
technical legal formalities.48
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 relationship between the signatory and non-signatory
parties; and seventh, once the validity of an arbitration agreement is established, the
court or tribunal can determine the issue of which parties are bound by such agreement.
79. It is presumed that the formal signatories to an arbitration agreement are parties
who will be bound by it. However, in exceptional cases persons or entities who have not
signed or formally assented to a written arbitration agreement or the underlying
contract containing the arbitration agreement may be held to be bound by such
agreement. As mentioned in the preceding paragraphs, the doctrine of privity limits the
imposition of rights and liabilities on third parties to a contract. Generally, only the
parties to an arbitration agreement can be subject to the full effects of the agreement in
terms of the reliefs and remedies because they consented to be bound by the arbitration
agreement. Therefore, the decisive question before the courts or tribunals is whether a
non-signatory consented to be bound by the arbitration agreement. To determine
whether a non-signatory is bound by an arbitration agreement, the courts and tribunals
apply typical principles of contract law and corporate law. The legal doctrines provide a
framework for evaluating the specific contractual language and the factual settings to
determine the intentions of the parties to be bound by the arbitration agreement.49
8 0 . Gary Born suggests that the legal theories and doctrines provide a basis for
determining the real intent of parties to be bound by an arbitration agreement.
Therefore, it is incorrect to use terminologies such as 'extension' of an arbitration
agreement to non-signatories or 'third parties':
Judicial case law and commentary on international arbitration sometimes make
reference to the "extension" of an arbitration agreement to non-signatories, or
to "third parties" on the basis of one or more of the foregoing theories. These
expression are inaccurate, in that they imply that an entity which is not a party
to an arbitration agreement is nonetheless subject to that agreement's effects,
by virtue of something other than the parties' consent. Contrary to the
references to "extension" or "third parties", most of the theories [...] provide a
basis for concluding that an entity is in reality a party to the arbitration
agreement - which therefore does not need to be "extended" to a "third party" -
because that party's actions constitute consent to the agreement, or otherwise
bind it to the agreement, notwithstanding the lack of its formal execution of the
agreement. The arbitration agreement is therefore not ordinarily "extended",
but rather the true parties that have consented to the arbitration agreement are
identified.
81. 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 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.
E. Group of Companies Doctrine
i. Separate legal personality
82. The phenomenon of group companies is the modern reality of economic life and
business organisation. Group companies are a set of separate firms linked together in
formal or informal structures under the control of a parent company. The group
companies can be defined in the Indian context as "an agglomeration of privately held
and publicly traded firms operating in different lines of business, each of which is
incorporated as a separate legal entity, but which are collectively under the
entrepreneurial, financial, and strategic control of a common authority, typically a
family, and are linked by trust-based relationships forged around a similar persona,
ethnicity, or community." 50 A group company involving the parent and subsidiary
companies are created for myriad purposes such as limiting the liability of the parent
corporation, facilitating international trade, entering into business ventures with
investors, establishing domestic corporate residence, and avoiding tax liability.
83. The principle of separate legal personality has been the cornerstone of corporate
law. In Salomon v. Salomon MANU/UKHL/0001/1896 : [1897] AC 22, the House of
Lords famously observed that a company is at law a different person altogether from the
promoters, directors, shareholders, and employees. The principle of separate legal
personality equally applies to corporate groups. A parent company is not generally held
to be liable for the actions of the subsidiary company of which it is a direct or indirect
shareholder. The Companies Act, 201351 has statutorily recognized a subsidiary
company as a separate legal entity. 52 Section 2(46) of the 2013 Act defines a holding
company as a company of which one or more other companies are subsidiary
companies. Section 2(87) defines "subsidiary company" to mean a company in which
the holding company exercises control over the composition of the Board of Directors
and has a controlling interest of at least 50 percent over the voting rights. Although a
holding company owns a controlling interest in the subsidiary company, they are
considered as separate legal entities. Group companies' structures allow multinational
corporations to structure their businesses at both the national and international level to
leverage better returns for the investors and ensure business growth of the corporation.
84. A Bench of three Judges of this Court in Vodafone International Holding B.V. v.
Union of India MANU/SC/0051/2012 : (2012) 6 SCC 613 emphasized the principles of
corporate separateness in the following terms:
101. A company is a separate legal persona and the fact that all its shares are
owned by one person or by the parent has nothing to do with its separate legal
existence. If the owned company is wound up, the liquidator, and its parent
company, would get hold of the assets of the subsidiary. In none of the
authorities have the assets of the subsidiary been held to be those of the parent
unless it is acting as an agent. Thus, even though a subsidiary may normally
comply with the request of a parent company it is not just a puppet of the
parent company. The difference is between having power or having a
persuasive position. Though it may be advantageous for parent and subsidiary
companies to work as a group, each subsidiary will look to see whether there
are separate commercial interests which should be gained.
85. The separateness of corporate personality will be ignored by courts in exceptional
situations where a company is used as a means by the members and shareholders to
carry out fraud or evade tax liabilities. If the court, on the basis of factual evidence,
determines that the company was acting as an agent of the members or shareholders, it
will ignore the separate personality of the company to attribute liability to the
individuals. In Tata Engineering and Locomotive Co. Ltd. v. State of Bihar
MANU/SC/0036/1964 : (1964) 6 SCR 885, the issue before a Constitution Bench of
this Court was whether a company could be treated as a citizen for the purposes of
maintaining a writ petition Under Article 32 of the Constitution. The company urged that
the corporate veil should be lifted to treat the petition as one filed by the shareholders.
This Court held that the veil of a corporation can be lifted where fraud is intended to be
prevented or trading with an enemy is sought to be defeated.
86. In case of group companies, there may arise situations where a holding company
completely dominates the affairs of the subsidiary company, to the extent of misusing
its control, to avoid or conceal liability. In such situations, the courts apply the doctrine
of "alter ego" or piercing the corporate veil to disregard the corporate separateness
between the two companies and treat them as a single entity. 53 In LIC v. Escorts Ltd.
MANU/SC/0015/1985 : (1986) 1 SCC 264, a Constitution Bench of this Court noted
that the principle of distinct legal personality may be ignored where the associate
companies are inextricably connected as to be, in reality, part of one concern. Speaking
for the Bench, Justice O. Chinnappa Reddy observed:
90. [...] Generally and broadly speaking, we may say that the corporate veil
may be lifted where a statute itself contemplates lifting the veil, or fraud, or
improper conduct is intended to be prevented, or a taxing statute or a
beneficent statute is sought to be evaded or where associated companies are
inextricable connected as to be, in reality, part of one concern. It is neither
 necessary nor desirable to enumerate the classes of cases where lifting the veil
is permissible, since that must necessarily depend on the relevant statutory or
other provisions, the object sought to be achieved, the impugned conduct, the
involvement of the element of the public interest, the effect on parties who may
be affected, etc.
87. The application of the doctrine of lifting the corporate veil rests on the overriding
considerations of justice and equity. 54 Often, the courts pierce the corporate veil when
maintaining the separateness of corporate personality is found opposed to justice,
convenience, and public interests.55 In Balwant Rai Saluja v. Air India
MANU/SC/0732/2014 : 2014:INSC:561 : (2014) 9 SCC 407, this Court cautioned that
the principle of piercing the corporate veil should be applied in a restrictive manner and
only in scenarios where it is evident that the subsidiary company was a mere
camouflage deliberately created by the holding company for the purpose of avoiding
liability. It was further observed that the intent of piercing the corporate veil must be
such that would seek to remedy a wrong done by the holding company. In the context
of arbitration, the principle of piercing the corporate veil has been sparingly used
because it disregards the intention of the parties by emphasizing on the overriding
considerations of good faith and equity to bind the non-signatories to an arbitration
agreement.
8 8 . Moreover, since the companies in a group have separate legal personality, the
presence of common shareholders or directors cannot lead to the conclusion that the
subsidiary company will be bound by the acts of the holding company. The statements
or representations made by promoters or directors in their personal capacity would not
bind a company. Similarly, the mere fact that the two companies have common
shareholders or a common Board of Directors will not constitute a sufficient ground to
conclude that they are a single economic entity. The single economic entity or the single
economic unit theory imposes general enterprise liability on the corporate group. In
D.H.N. Food Distributors Ltd. v. Tower Hamlets London Borough Council
MANU/UKWA/0040/1976 : [1976] 1 WLR 852 (2), Lord Denning held that a group of
three companies should be treated as a single economic entity on the basis of two
factors: first, the parent company owned all the shares of the subsidiary companies to
the extent that it controlled every movement of the given subsidiary companies; and
second, all the three companies in the group virtually acted as partners and could not
be treated separately. Thus, the determination of whether two or more companies
constitute a single economic entity depends upon the concerted efforts of the companies
to act in pursuance of a common endeavour or enterprise.
89. From the above discussion, we can infer that entities within a corporate group have
separate legal personality, which cannot be ignored save in exceptional circumstances
such as fraud. The distinction between a parent company and its subsidiary is
fundamental, and cannot be easily abridged by taking recourse to economic
convenience.56 Legally, the rights and liabilities of a parent company cannot be
transferred to the subsidiary company, and vice versa, unless, there is a strong legal
basis for doing so.
ii. Adopting a pragmatic approach to consent
90. In the context of arbitration law, the intention of the parties has to be derived from
the words used in the arbitration agreement. While construing the arbitration
agreement, it is the duty of the court to not delve deep into the intricacies of the human
mind, but only consider the expressed intentions of the parties.57 The words used in the
contract reflect the commercial understanding between the parties. The intention of the
parties has to be ascertained from the words used in the contract, considered in light of
the surrounding circumstances and the object of such contract.58
91. An arbitration agreement encapsulates the commercial understanding of business
entities as regards to the mode and manner of settlement of disputes that may arise
between them in respect of their legal relationship. In most situations, the language of
the contract is only suggestive of the intention of the signatories to such contract and
not the non-signatories. However, there may arise situations where a person or entity
may not sign an arbitration agreement, yet give the appearance of being a veritable
party to such arbitration agreement due to their legal relationship with the signatory
parties and involvement in the performance of the underlying contract. Especially in
cases involving complex transactions involving multiple parties and contracts, a non-
signatory may be substantially involved in the negotiation or performance of the
contractual obligations without formally consenting to be bound by the ensuing
burdens, including arbitration.
9 2 . Modern commercial reality suggests that there often arise situations where a
company which has signed the contract containing the arbitration Clause is not always
the one to negotiate or perform the underlying contractual obligations. In such
situations, emphasis on formal consent will lead to the exclusion of such non-
signatories from the ambit of the arbitration agreement, leading to multiplicity of
proceedings and fragmentation of disputes. In A. Ayyasamy v. A. Paramsivam
MANU/SC/1179/2016 : 2016:INSC:948 : (2016) 10 SCC 386, this Court observed that
it is the duty of the courts "to impart to that commercial understanding a sense of
business efficacy." The courts must interpret contracts in a manner that would give
them a sense of efficacy rather than invalidating the commercial interests of the parties.
The meaning of the contract must be gathered by adopting a common sense approach,
which should "not be allowed to be thwarted by a narrow, pedantic and legalistic
interpretation."59 Therefore, there is a need to adopt a modern approach to consent,
which takes into consideration the circumstances, apparent conduct, and commercial
facets of business transactions.
93. As Professor Hanotiau suggests, there is a need to adopt a modern and pragmatic
approach to consent:
I would suggest that it is more accurate to refer to a modern approach to
consent; an approach that is more pragmatic, more focussed on an analysis of
facts, which places an emphasis on commercial practice, economic reality, trade
usages, and the complex and multifaceted dimensions of large projects
involving group of companies and connected agreements in multiparty multi-
contract scenarios; an approach that is no longer restricted to express consent
but that takes into consideration all its various expressions and tends to give
much more importance than before to the conduct of the individuals or
companies concerned.60
94. It has been urged before us that where a written arbitration agreement clearly sets
out the parties to it, the courts or tribunals cannot read into the agreement an intention
to bind persons or entities other than the signatory parties. Reliance was placed on
Roop Kumar v. Mohan Thedani MANU/SC/0276/2003 : (2003) 6 SCC 595, where this
Court observed that "wherever written instruments are appointed, either by the
requirement of law, or by the contract of the parties, to be the repositories and
memorials of truth, any other evidence is excluded from being used either as a
substitute for such instruments, or to contradict or alter them." Consequently, it was
urged that the courts or tribunals cannot interpret the arbitration agreement in a manner
so as to expand its reach to parties not named in the agreement.
95. Arbitration law is an autonomous legal field. While the main purpose of corporate
law and contract law is imputation of substantive legal liability, the main purpose
behind the law of arbitration is to determine whether an arbitral tribunal has jurisdiction
over the dispute arising between parties to an arbitration agreement. On the one hand,
the courts and tribunals cannot lightly brush aside the decision of the parties to not
make a person or entity a party to the arbitration agreement. The fact that the non-
signatory did not put pen to paper may be an indicator of its intention to not assume
any rights or responsibilities under the arbitration agreement. On the other hand, courts
and tribunals cannot adopt a rigid approach to exclude all persons or entities who,
through their conduct and relationship with the signatory parties, intended to be bound
by the underlying contract containing the arbitration agreement. The area of arbitration
law not only concerns domestic law, but it also encompasses the international law,
particularly when it pertains to the enforcement of international arbitral awards.
Therefore, this Court ought to adopt a balanced approach without comprising on the
basic principles of arbitration law, contract law, and company law to ensure that the
resultant legal framework is consistent with internationally accepted practices and
principles.
9 6 . A formalistic construction of an arbitration agreement would suggest that the
decision of a party to not sign an arbitration agreement should be construed to mean
that the mutual intention of the parties was to exclude that party from the ambit of the
arbitration agreement. Indeed, corporate entities have the commercial and contractual
freedom to structure their businesses in a manner to limit their liability. However, there
have been situations where a corporate entity deliberately made an effort to be not
bound by the underlying contract containing the arbitration agreement, but was actively
involved in the negotiation and performance of the contract. The level of the non-
signatory party's involvement was to the extent of making the other party believe that it
was a veritable party to the contract, and the arbitration agreement contained under it.
Therefore, the group of companies doctrine is applied to ascertain the intentions of the
parties by analysing the factual circumstances surrounding the contractual
arrangements.61
9 7 . Increasingly, multinational groups often adopt new and sophisticated corporate
structures for execution and delivery of complex commercial transactions such as
construction contracts, concession contracts, license agreements, long-term supply
contracts, banking and financial transactions, and maritime contracts. For the execution
of such contracts, corporate structures may take the form of groups based on equity,
joint ventures, and informal alliances.62 A multi-corporate structure helps a group in
adopting commercially effective models of operation as different companies can get
involved at different stages of a single transaction. Often, persons or entities, who are
not signatories to the underlying contract containing the arbitration agreement, are
involved in the negotiation, performance, or termination of the contract. In the context
of arbitration law, the challenge arises when only one member of the group signs the
arbitration agreement, to the exclusion of other members. Should the non-signatories
be excluded from the arbitration proceedings, even though they were implicated in the
dispute which forms the subject matter of arbitration? As a response to this challenge,
arbitration law has developed and adopted the group of companies doctrine, to allow or
compel a non-signatory party to be bound by an arbitration agreement.
iii. Group of companies doctrine - a fact based doctrine
98. The group of companies doctrine is used in the context of companies which are
related to each other by virtue of their being a part of the same corporate group. Since
every company in a group has a separate legal personality, a contract formally entered
by one member of a group will not be binding on the other members by virtue of the
limited liability principle. The group of companies doctrine is used to bind a non-
signatory company within a group to an arbitration agreement which has been signed
by other member of the group.63 The underlying basis of the group of companies
doctrine rests on maintaining the corporate separateness of the group companies while
determining the common intention of the parties to bind the non-signatory party to the
arbitration agreement. In other words, the group of companies doctrine is a means of
identifying the common intention of the parties to bind a non-signatory to arbitration
agreement by emphasizing and analysing the corporate affiliation of the distinct legal
entities.64
99. The group of companies doctrine has been a subject of rigorous academic debate
among practitioners of arbitration law and academics with domain expertise. The first
view questions the necessity of adopting the doctrine by suggesting that the
determination of consent in complex multi-party arbitration can be done on the basis of
traditional contractual and commercial law theories. Professor Bernard Hanotiau
suggests that the group of companies doctrine should be discarded because it has been
used as a "shortcut to avoid legal reasoning" leading to a distorted approach by courts
and arbitral tribunals.65 However, Professor Hanotiau does concede that the existence of
a group of companies may be a relevant factual element to determine whether the
conduct of a non-signatory party amounts to consent.
100. In contrast, the second view suggests that the group of companies doctrine is an
integral aspect of arbitration law. According to this view, the existence of specific
patterns of corporate structure could be a useful factual indicator to determine the
common intention of the parties to make the non-signatory a party to the arbitration
agreement.66 For instance, the active involvement of a non-signatory group company in
the facilitation and performance of a commercial project helmed by other signatory
companies of the group can be considered as an indication that the non-signatory party
also consented to arbitrate. Moreover, Gary Born also suggests that the group of
companies doctrine is helpful because it allows the courts to go beyond the objective
intentions of the parties to determine their dynamic subjective intentions both before,
during, and after the execution of the contract.67 According to Born, the doctrine also
promotes efficacy of arbitration agreements by prohibiting circumvention of arbitration
through satellite litigation by non-signatory parties within a group. We are broadly in
agreement with this view for the reasons to follow.
101. The group of companies doctrine was developed by international arbitral tribunals
specifically in the context of arbitration, and is not generally used in other areas of
law.68 Although the existence of a group of companies is a necessary condition, it is not
the sufficient condition to determine the intention of the parties. In almost all
formulations, the courts and tribunals have cautioned that the mere membership of a
non-signatory in a group of companies is not enough to bind it to the arbitration
agreement. Rather, the courts need to determine: first, the existence of a group of
companies; and second, the conduct of the signatory and non-signatory parties which
indicate their common intention to make the non-signatory a party to the arbitration
agreement.69 Thus, the group of companies doctrine is similar to other consent based
doctrines such as agency, assignment, assumption, and guarantee to the extent that it is
ordinarily applied as a means of identifying the common intention of the parties to bind
the non-signatory to the arbitration agreement.
102. The above position was explicitly adopted by the ICC Tribunal in Dow Chemicals
(supra) where it held that an arbitration agreement signed by certain companies of a
corporate group will bind the other non-signatory members only where all the parties
intended and understood the non- signatories to be the "veritable parties" to the
underlying contract containing the arbitration agreement based on their participation in
the "conclusion, performance, or termination of the contracts". Thus, the existence of a
group of companies is a factual element that the court or tribunal has to consider when
analysing the consent of the parties. It inevitably adds an extra layer of criteria to an
exercise which at its core is preponderant on determining the consent of the parties in
case of complex transactions involving multiple parties and agreements.
103. In Chloro Control (supra), this Court rightly observed that a non-signatory could
be subjected to arbitration provided the underlying transactions were with a group of
companies and there was a clear intention of the parties to bind both the signatory as
well as non-signatory parties to the arbitration agreement. This legal proposition has
been reiterated in a series of subsequent decisions of this Court including Canara Bank
(supra) and Discovery Enterprises (supra). Further, this Court in Cheran Properties
(supra) held that the group of companies doctrine helps in decoding the layered
structure of commercial arrangements to unravel the true intention of the parties to bind
someone who is not formally a signatory to the contract, but has "assumed" the
obligation to be bound by the actions of a signatory. This Court explained the purport of
the doctrine to discern the "true" party in interest:
2 5 . [...] The group of companies doctrine has been applied to pierce the
corporate veil to locate the "true" party in interest, and more significantly, to
target the creditworthy member of a group of companies. Through the
extension of this doctrine is met with resistance on the basis of the legal
imputation of corporate personality, the application of the doctrine turns on a
construction of the arbitration agreement and the circumstances relating to the
entry into and performance of the underlying contract.
104. In Cox and Kings (supra), Surya Kant, J. questioned whether the principles of
alter ego or piercing the corporate veil can alone justify the application of the group of
companies doctrine even in the absence of implied consent. This Court in Cheran
Properties (supra) clarified that there is an important distinction between the group of
companies doctrine and the principle of veil piercing or alter ego. The principle of alter
ego disregards the corporate separateness and the intentions of the parties in view of
the overriding considerations of equity and good faith. In contrast, the group of
companies doctrine facilitates the identification of the intention of the parties to
determine the true parties to the arbitration agreement without disturbing the legal
personality of the entity in question. Therefore, the principle of alter ego or piercing the
corporate veil cannot be the basis for the application of the group of companies
doctrine.
iv. The determination of mutual intention
1 0 5 . In multi-party agreements, the courts or tribunals will have to examine the
corporate structure to determine whether both the signatory and non- signatory parties
belong to the same group. This evaluation is fact specific and must be carried out in
accordance with the appropriate principles of company law. Once the existence of the
corporate group is established, the next step is the determination of whether there was
a mutual intention of all the parties to bind the non-signatory to the arbitration
agreement.
106. The group of companies doctrine requires the courts and tribunals to consider the
commercial circumstances and the conduct of the parties to evince the common
intention of the parties to arbitrate. It is important to note that the group of companies
doctrine concerns only the parties to the arbitration agreement and not the underlying
commercial contract.70 Consequently, a non-signatory could be held to be a party to the
arbitration agreement without becoming a formal party to the underlying contract. The
existence of a group companies is one of the essential factors to determine whether the
conduct amounts to consent but membership of a group is not sufficient in itself. This
has been the consistent position of law, starting from the Dow Chemicals (supra)
award, where it was observed that the common intention of the parties to bind the non-
signatory party to the arbitration can be inferred from the "circumstances that surround
the conclusion and characterize the performance and later the termination of the
contracts." In other words, it was held that a non-signatory party could be considered
as a "true party" to the arbitration agreement on the basis of their role in the
conclusion, performance, or termination of the underlying contract containing the
arbitration agreement.
107. This Court in Chloro Controls (supra) laid down four factual indices that the courts
or tribunals should consider to bind a non-signatory party to arbitration agreement. It is
important to extract the relevant paragraphs in full:
7 2 . This evolves the principle that a non-signatory could be subjected to
arbitration provided these transactions were with group of companies and there
was a clear intention of the parties to bind both, the signatory as well as the
non-signatory parties. In other words, "intention of the parties" is a very
significant feature which must be established before the scope of the
arbitration can be said to include the signatory as well as the non-
signatory party.
73. A non-signatory or third party could be subjected to arbitration without
their prior consent, but this would only be in exceptional cases. The court
will examine these exceptions from the touchstone of direct relationship to the
party signatory to the arbitration 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.
(emphasis supplied)
108. In Cox and Kings (supra), Justice Surya Kant observed a contradiction in terms of
the above extracted paragraphs 72 and 73 of Chloro Controls (supra). According to
Justice Surya Kant, on the one hand, Chloro Controls (supra) emphasizes on the
"intention of the parties", while on the other hand it allows joinder of non-signatory
parties to arbitration proceedings "without their prior consent". Justice Surya Kant is
indeed correct in noticing this inconsistency in the observations in the above two
paragraphs. Para 72 underlines mutual intent while para 73 seems to move away from it
by suggesting an absence of prior consent as well. We would like to clarify that the
phrase "without their prior consent" has to be construed as "without prior formal
consent to the arbitration agreement or the underlying contract containing the
arbitration agreement." Reading the above two paragraphs harmoniously, it is evident
that paragraph 72 emphasizes on determining the "intention of the parties" to bind a
non-signatory party to an arbitration agreement. In paragraph 73, the Court deals with
the tests for joining a non- signatory party which has not formally consented to the
arbitration agreement. Furthermore, the said paragraph enlist the cumulative factors for
deciphering the mutual intention of the parties to join non-signatory parties to the
arbitration agreement. In view of the above clarification, we are of the opinion that so
construed there would be no inconsistency between paragraphs 72 and 73 of Chloro
Controls (supra).
109. One of the contentions that has been raised before us pertains to the observations
in paragraph 73 of Chloro Controls (supra) that the composite reference of all the
parties should "serve the ends of justice". It was contended that the equity jurisdiction
doesn't generally apply to arbitration agreements because they are in the realm of
private law. Since arbitration is a matter of consent, interests of justice and equity
cannot be the sole grounds for invoking arbitration agreement. The primary test to
apply the group of companies doctrine is by determining the intention of the parties on
the basis of the underlying factual circumstances. The application of the group of
companies doctrine will serve to stymie satellite litigation by non-signatory members of
the corporate group, thereby ensuring the efficacy of the agreement between the
parties. Avoiding multiplicity of proceedings and fragmentation of disputes is certainly
in the interests of justice. However, it can never be the sole consideration to invoke the
group of companies doctrine.
110. In Discovery Enterprises (supra), this Court refined and clarified the cumulative
factors that the courts and tribunals should consider in deciding whether a company
within a group of companies is bound by the arbitration agreement:
40. In deciding whether a company within a group of companies which is not a
signatory to arbitration agreement would nonetheless be bound by it, the law
considers the following factors:
(i) The mutual intent of the parties;
(ii) The relationship of a non-signatory to a party which is a signatory
to the agreement;
(iii) The commonality of the subject-matter;
(iv) The composite nature of the transactions; and
(v) The performance of the contract.
111. Since the group of companies doctrine is a consent based theory, its application
depends upon the consideration of a variety of factual elements to establish the mutual
intention of all the parties involved. In other words, the group of companies doctrine is
a means to infer the mutual intentions of both the signatory and non-signatory parties
to be bound by the arbitration agreement. The relationship between and among the
legal entities within the corporate group structure and the involvement of the parties in
the performance of the underlying 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. The party seeking joinder of a non-signatory bears the burden of proof of
satisfying the above factors to the satisfaction of the court or tribunal, as the case may
be.
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. 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.
113. In Canara Bank (supra), this Court observed that the group of companies doctrine
can also be invoked in cases where a "tight group structure with strong organisational
and financial links, so as to constitute a single economic unit, or a single economic
reality." In Cox and Kings (supra), Justice Surya Kant observed that applying this
approach has the tendency to overlook the principle of corporate separateness and
dispense with the consent of the parties. There is weight in the caution expressed by
Justice Surya Kant. The presence of commercial relationships between a party and a
non-signatory cannot be the sole criteria to bind non-signatory parties to the arbitration
agreement. Adopting such an approach would bind all the non-signatories within a
corporate group, even though they are not related to the contractual obligations under
consideration, to the arbitration agreement. Consequently, such an approach will lead to
the violation of the basic legal tenet of arbitration - the necessity of consent, either
express or implied, to be bound by an arbitration agreement. Moreover, the imposition
of liability on a non-signatory company within a group for the acts of other members of
the group merely on the basis of the fact that they belong to a "single economic unit"
will ride roughshod over the principle of distinct corporate personality. The objective of
the group of companies doctrine is to identify the mutual intentions of the parties
without disregarding the legal personality of the entities.
114. In Dow Chemicals (supra), it was held that a group of companies constitutes the
same economic reality, which has to be considered by the arbitral tribunal while
deciding on its jurisdiction. According to the tribunal, the presence of the group of
companies is merely an additional factor that the tribunal may consider to determine the
mutual intention of the parties. In Canara Bank (supra), this Court did not apply the
group of companies doctrine solely on the basis that the companies belonged to a
single economic unit. Rather, it was held that there was an implied or tacit consent by
the non-signatory party (CANFINA) to being impleaded in the arbitral proceedings. The
presence of strong organizational links and financial links between the signatory and
non- signatory parties is only one of the factual elements that the court or tribunal may
consider to determine the legal relationship between the signatory and non-signatory
parties. We accordingly clarify that the principle of "single economic entity" cannot be
used as a sole basis to invoke the group of companies doctrine.
1 1 5 . 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 contract underlying the arbitration agreement
pertains to distribution of healthcare goods, the conduct of the non-signatory party
should also be connected or in pursuance of the contractual duties and obligations, that
is, pertaining to the distribution of healthcare goods. The determination of this factor is
important to demonstrate that the non-signatory party consented to arbitrate with
respect to the particular subject matter.
116. In case of a composite transaction involving multiple agreements, it would be
incumbent for the courts and tribunals to assess whether the agreements are
consequential or in the nature of a follow-up to the principal agreement. This Court in
Canara Bank (supra) observed that a composite transaction refers to a situation where
the transaction is interlinked in nature or where the performance of the principal
agreement may not be feasible without the aid, execution, and performance of the
supplementary or ancillary agreements.
117. The general position of law is that parties will be referred to arbitration under the
principal agreement if there is a situation where there are disputes and differences "in
connection with" the main agreement and also disputes "connected with" the subject-
matter of the principal agreement.71 In Chloro Controls (supra), this Court clarified that
the principle of "composite performance" would have to be gathered from the conjoint
reading of the principal and supplementary agreements on the one hand, and the
explicit intention of the parties and attendant circumstances on the other. The common
participation in the commercial project by the signatory and non- signatory parties for
the purposes of achieving a common purpose could be an indicator of the fact that all
the parties intended the non-signatory party to be bound by the arbitration agreement.
Thus, the application of the group of companies doctrine in case of composite
transactions ensures accountability of all parties who have materially participated in the
negotiation and performance of the transaction and by doing so have evinced a mutual
intent to be bound by the agreement to arbitrate.
1 1 8 . The participation of the non-signatory in the performance of the underlying
contract is the most important factor to be considered by the courts and tribunals. The
conduct of the non-signatory parties is an indicator of the intention of the non-signatory
to be bound by the arbitration agreement. 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 agreement. The UNIDROIT
Principle of International Commercial Contract, 201672 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.
119. In Dow Chemicals (supra), consent of the non-signatory parties to arbitrate was
implied primarily in view of their predominant participation in the conclusion,
performance, and termination of contracts. Similarly, this Court in Canara Bank (supra)
observed that a non-signatory entity may be bound by an arbitration agreement where a
parent or a member of the group of companies is a signatory to the arbitration
agreement and the non-signatory entity of the group has been engaged in the
negotiation or performance of the commercial contract.
120. In Reckitt Benckiser (supra), this Court was called upon to determine whether the
representation of a purported promoter of a non-signatory entity would bind it to the
said representation. In that case, the applicant entered into an agreement with an
Indian company for the supply of packing materials. During the stage of negotiation,
the applicant circulated a draft of the agreement by email with the Indian company. This
email was reverted by one Mr. Frederick Reynders, who the applicant claimed was the
promoter of a Belgian sister company of the Indian company. The Belgian company was
a non-signatory to the agreement. Yet, the applicant sought to implead the Belgian
company on the basis that it had participated during the negotiations preceding the
execution of the agreement. This Court refused to allow the joinder of the Belgian
company to the arbitration agreement on the grounds that Mr. Reynders was not the
promoter of the Belgian company, and was therefore not acting in that capacity on or
behalf of the company and the applicant failed to discharge its burden to prove that the
Belgian company consented to the arbitration agreement.
1 2 1 . 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. First, by being actively involved in the performance of a contract, a non-
signatory may create an appearance that it is a veritable party to the contract containing
the arbitration agreement; second, the conduct of the non- signatory may be in
harmony with the conduct of the other members of the group, leading the other party to
legitimately believe that the non-signatory was a veritable party to the contract; and
third, the other party has legitimate reasons to rely on the appearance created by the
non-signatory party so as to bind it to the arbitration agreement.
v. Threshold standard
122. In Cox and Kings (supra), Justice Surya Kant observed that Reckitt Benckiser
(supra) fixed a higher threshold of evidence for the application of the group of
companies doctrine as compared to earlier decisions of this Court. This Court's
approach is Reckitt Benckiser (supra) is indicative of the fact that the mere presence of
a group of companies is not the sole or determinative factor to bind a non-signatory to
an arbitration agreement. Rather, the courts or tribunals should closely evaluate the
overall conduct and involvement of the non-signatory party in the performance of the
contract. The nature or standard of involvement of the non-signatory in the performance
of the contract should be such that the non-signatory has actively assumed obligations
or performance upon itself under the contract. In other words, the test is to determine
whether the non-signatory has a positive, direct, and substantial involvement in the
negotiation, performance, or termination of the contract. Mere incidental involvement in
the negotiation or performance of the contract is not sufficient to infer the consent of
the non-signatory to be bound by the underlying contract or its arbitration agreement.
The burden is on the party seeking joinder of the non-signatory to the arbitration
agreement to prove a conscious and deliberate conduct of involvement of the non-
signatory based on objective evidence.
1 2 3 . An arbitration agreement is a distinct and separate agreement from the
substantive commercial contract which contains the arbitration agreement. An
arbitration agreement is independent of the other terms of the contract, to the extent
that nullification of the contract will not lead to invalidation of the arbitration
agreement.73 The concept of separability of the arbitration agreement from the
underlying contract ensures that the intention of the parties to resolve the disputes
through arbitration does not vanish merely because of a challenge to the legal validity
of the underlying contract.74 To join a non-signatory to arbitration, the decisive
question that has to be answered is whether a non-signatory consented to the
arbitration agreement, as distinct from the underlying contract containing the arbitration
agreement.75
124. Stavros Brekoulakis argues that the application of legal theories such as group of
companies doctrine rests on an assumption that an arbitration agreement requires "less
consent" or "less evidence of consent" than the underlying contract containing the
arbitration agreement.76 Brekoulakis further notes that the assumption that implied
consent of a non-signatory to the underlying contract is sufficient to constitute consent
to the arbitration agreement contained in such contract militates against the principle of
separability of contracts.77
125. The non-signatory's participation in the negotiation, performance, or termination
of the contract can give rise to the implied consent of it being bound by the contract.
Brekoulakis rightly points out an anomalous situation where the legal theories such as
the group of companies doctrine treat consent as a functional legal construct without
actually determining the main question - whether the arbitral tribunal has jurisdiction
over the parties (and non-signatory parties) to resolve the disputes?78
1 2 6 . The involvement of a non-signatory in the negotiation, performance, or
termination of the underlying contract could be an important indicator of the fact that
such non-signatory accepted to be bound by the contract. However, transposition of
such consent to an arbitration agreement is a legal fiction to accommodate commercial
reality. The contemporary commercial reality suggests that different companies within a
group often become involved in different stages of execution and performance of a
contractual transaction. For instance, a non-signatory may merely participate in the
performance of a contract to carry out a specific task or assist the parent company.
Such incidental involvement in the contractual performance is insufficient to constitute
consent to the underlying contract, let alone the arbitration agreement. Rather, it has
been suggested that it should also be considered whether the commercial dispute
sufficiently implicates the non-signatory party for the arbitral tribunal to exercise its
jurisdiction.79 The emphasis on the scope of the jurisdiction of the arbitral tribunal with
respect to the subject matter of the dispute between the signatory parties would ensure
effective arbitration and prevent unnecessary fragmentation of disputes. It also
adequately accounts for the lack of formal consent on behalf of the non- signatory to
the arbitration agreement (and the ensuing procedural aspects such as the constitution
of arbitral tribunal) by considering facts and circumstances, such as close relationship
and composite transactions, which indicates that there was a mutual understanding or
convergence among all the parties to treat non-signatory as parties to the arbitration
agreement.80
1 2 7 . We are of the opinion that there is a need to seek a balance between the
consensual nature of arbitration and the modern commercial reality where a non-
signatory becomes implicated in a commercial transaction in a number of different
ways. Such a balance can be adequately achieved if the factors laid down under
Discovery Enterprises (supra) are applied holistically. For instance, the involvement of
the non-signatory in the performance of the underlying contract in a manner that
suggests that it intended to be bound by the contract containing the arbitration
agreement is an important aspect. Other factors such as the composite nature of
transaction and commonality of subject matter would suggest that the claims against
the non-signatory were strongly inter-linked with the subject matter of the tribunal's
jurisdiction. Looking at the factors holistically, it could be inferred that the non-
signatories, by virtue of their relationship with the signatory parties and active
involvement in the performance of commercial obligations which are 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. 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.
F. The group of companies doctrine has independent existence
129. In Cox and Kings (supra), Chief Justice Ramana observed that Chloro Controls
(supra), and the series of subsequent decisions, have not appropriately dealt with the
scope and ambit of the phrase "claiming through or under" as appearing Under Sections
8 and 45 of the Arbitration Act. Connectedly, one of the issues that arises for the
consideration of this Court is whether the phrase "claiming through or under" could be
interpreted to include the group of companies doctrine.
130. The Arbitration Act does not define the phrase "person claiming through or under"
a party. A person "claiming through or under" a party is not a signatory to the contract
or agreement, but can assert a right through or under the signatory party. Russel on
Arbitration states that an assignee can invoke the arbitration agreement as a person
"claiming through or under" a party to the arbitration agreement.81 An assignee takes
the assigned right under a contract with both the benefit and burden of the arbitration
clause.82 Similarly, the English courts have held that a transferee or subrogate can
claim through or under a party to the arbitration agreement.83 Under the English law,
the typical scenarios where a person or entity can claim through or under a party are
assignment, subrogation, and novation. In these situations, the assignees or
representatives become successors to the signatory party's interests under the
arbitration agreement. They step into the shoes of the signatory party, from whom they
derive the right to arbitrate, rather than claiming an independent right under the
arbitration agreement.
131. The scope of an arbitration agreement under the English law is limited to the
parties who entered into it and those claiming through or under them.84 In Roussel-
Uclaf (supra), it was held that a subsidiary company can invoke the arbitration
agreement on the basis that it is "claiming through or under" the parent company
because of the close relationship between the two companies. However, Roussel-Uclaf
(supra) was expressly overruled by the Court of Appeal in Sancheti (supra) on the
ground that a mere legal or commercial connection is not sufficient for a person to
claim through or under a party to an arbitration agreement.
132. The scope of the phrase "claiming through or under" has been evaluated by other
common law jurisdictions. In Tanning Research Laboratories Inc v. O'Brien
MANU/AUSH/0062/1990 : [1990] HCA 8, the issue before the High Court of Australia
was whether a liquidator could be regarded as a person "claiming through or under" a
party to an arbitration agreement. The High Court construed the words "through" or
"under" to hold that the liquidator had a derivative interest through the company. The
relevant observation is extracted below:
[T]he prepositions "through" or "under" convey the notion of a derivative cause
of action or ground of defence, that is to say, a cause of action or ground of
defence derived from the party. In other words, an essential element of the
cause of action or defence must be or must have been vested in or exercisable
by the party before the person claiming through or under the party can rely on
the cause of action or ground of defence. A liquidator may be a person claiming
through or under a company because the causes of action or grounds of
defence on which he relies are vested in or exercisable by the company; a
trustee in bankruptcy may be such a person because the causes of action or
grounds of defence on which he relies were vested in or exercisable by the
bankrupt.
The test of derivative action conveys that a third party's cause of action is derived from
the original party to the arbitration agreement. The third party cannot be saddled with
new duties and liabilities to which it has not consented. They can only be held liable or
entitled to the extent they derive their rights or entitlements from the original party to
the agreement.
1 3 3 . The above formulation was further clarified by the Australian High Court in
Rinehart v. Hancock Prospecting Pty Ltd. MANU/AUSH/0013/2019 : [2019] HCA 13,
where it observed that the ultimate test in Tanning Research (supra) was whether an
essential element of the defence was or is vested in or exercisable by the party to the
arbitration agreement. In Rinehart (supra), the Court was dealing with a situation where
a signatory party had assigned mining tenements in breach of trust. It was held that
assignees stand in the same position vis-�-vis the claimant as the assignor since
the "assignee [took] its stand upon a ground which [was] available to the assignor."
The Court concluded that the assignees were persons claiming through or under the
signatory parties on the basis that the parties to the arbitration agreement had agreed
that any dispute as to the beneficial title to the mining tenements would be determined
by arbitration. Since the third parties accepted the benefits of the agreement, it was
held that they must also accept the burdens of its stipulated conditions, including
arbitration.
134. In Rinehart (supra), the Australian High Court's approach is similar to the doctrine
of equitable estoppel developed by the US Courts, to the effect that a non-signatory
party who elects to take the benefit of some aspects of the contract, must also accept
the burden of it.85 However, we cannot adopt the Rinehart (supra) position in the
context of the phrase "claiming through or under" as doing so would be contrary to the
common law position and the legislative intent underpinning the Arbitration Act, as will
be discussed below.
135. An analysis of the cases cited above establishes the following propositions of law:
first, the typical scenarios where a person or entity can claim through or under a party
are assignment, subrogation, and novation; second, a person "claiming through or
under" can assert a right in a derivative capacity, that is through the party to the
arbitration agreement, to participate in the agreement; third, the persons claiming
through or under do not possess an independent right to stand as parties to an
arbitration agreement, but as successors to the signatory parties' interest; and fourth,
mere legal or commercial connection is not sufficient for a non-signatory to claim
through or under a signatory party.
i. Party and Persons "claiming through or under" are different
136. The 246th Law Commission suggested that the definition of "party" Under Section
2(1)(h) of the Arbitration Act be amended to include the words "or any persons
claiming through or under such party". The Commission reasoned that in appropriate
contexts, a party also include persons "claiming through or under" a signatory party
such as successors-in-interest. However, the suggested amendment was not carried out
by Parliament.
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.86 A "claim" also means assertion of a cause of action.87 The expression "through"
connotes "by means of, in consequence of, by reason of." 88 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.89 When the above definitions are read harmoniously, it
gives rise to an inference that a person "claiming through or under" is asserting their
legal demand or cause of action in an intermediate or derivative capacity. We can also
conclude that a person "claiming through or under" has inferior or subordinate rights in
comparison to the party from which it is deriving its claim or right. Therefore, a person
"claiming through or under" cannot be a "party" to an arbitration agreement on its own
terms because it only stands in the shoes of the original signatory party.
138. An arbitration is founded upon the consent of the parties to refer their disputes to
an alternative dispute resolution mechanism. Consequently, third parties typically
cannot be compelled to arbitrate based on an agreement to which they have not
consented. The phrase "claiming through or under" has not been used either in Section
2(1)(h) or Section 7 of the Arbitration Act. This is because those provisions are based
on the concept of party autonomy and party independence, which requires the party to
provide consent to submit their disputes to arbitration. On the contrary, a person
claiming through or under a party to an arbitration agreement is merely standing in the
shoes of the original party to the extent that it is merely agitating the right of the
original party to the arbitration agreement.
139. The phrase "claiming through or under" has been used in Sections 8, 35, and 45
in their specific contexts. Section 8 contains a mandate that when an action is brought
before a judicial authority which is the subject of an arbitration agreement, the dispute
shall be referred to arbitration on an application made by a party or any person claiming
through or under him. As mentioned above, the phrase "claiming through or under" was
inserted in Section 8 to bring it in line with Section 45. Sections 8 and 45 are
peremptory in nature mandating the court to refer the parties to arbitration if there is a
valid arbitration agreement.90 In A Ayyasamy (supra), it was held that Section 8
imposes an affirmative obligation on every judicial authority to "hold down parties to
the terms of the agreement entered into between them to refer disputes to
arbitration."91 Thus, the legislative intent behind Sections 8 and 45 is to ensure that
parties fulfil their mutual intention of settling disputes arising between or among them
by way of arbitration.
140. Section 35 of the Arbitration Act provides that an arbitral award shall be final and
binding on the parties and persons claiming under them respectively. In Cheran
Properties (supra), this Court rightly observed that the expression "persons claiming
under them" is "a legislative recognition of the doctrine that besides the parties, an
arbitral award binds every person whose capacity or position is derived from and is the
same as a party to the proceedings." It was further observed that "[h]aving derived its
capacity from a party and being in the same position as a party to the proceedings
binds a person who claims under it." Similarly, Section 73 also provides that a
settlement agreement signed by the parties shall be final and binding "on the parties
and persons claiming under them respectively."
141. Sections 8, 35, and 45 use the phrase "parties or any person claiming through or
under". The word "or" is used in Section 8 and 45 as a disjunctive particle to express an
alternative or give a choice between "parties" or "any person claiming through or
under". Consequently, either the party to an arbitration agreement or any person
claiming through or under the party can make an application to the judicial authority to
refer the dispute to arbitration. It is in the interest of respecting the intention of the
parties and promoting commercial efficacy, that the above provisions allow either the
party or any person "claiming through or under him" to refer the disputes to arbitration.
1 4 2 . On the other hand, Sections 35 and 73 use the phrase "parties and persons
claiming under them". The use of the word "and" in Sections 35 and 73 conveys the
idea that "parties" is to be added or taken together with the subsequent phrase "any
person claiming through or under." The above provisions provide that an arbitration
award binds not only the parties but also all such persons who derive their capacity
from the party to the arbitration agreement. Again, the foundational basis for this
provision is commercial efficacy as it ensures that an arbitral award leads to finality,
such that both the parties and all persons claiming through or under them do not
reagitate the claims. Moreover, the use of the word "and" in Sections 35 and 73 leads to
an unmistakable conclusion that under the Arbitration Act, the concept of a "party" is
distinct and different from the concept of "persons claiming through or under" a party to
the arbitration agreement.
ii. The approach adopted by this Court in Chloro Controls is Incorrect
1 4 3 . This Court in Chloro Controls (supra) observed: first, that the use of the
expression "any person" reflects the legislative intent of enlarging the scope of the
words beyond the "parties" who are signatory to the arbitration agreement; second, a
signatory party to an arbitration agreement may have a legal relationship with the party
claiming through or under the party on the basis of the group of companies doctrine;
and third, in case of a multi-party contract, a subsidiary company which "derives" its
basic interest from the parent contract would be covered under the expression "claiming
though or under."
144. The first proposition of law relies on the construction of the expression "any
person" to conclude that the language of Section 45 has wider import. However, the
expression "any person" cannot be singled out and construed devoid of its context. The
context, in terms of Section 8 and 45, is provided by the subsequent phrase - "claiming
through or under". Therefore, such "any persons" are acting only in a derivative
capacity. Since an arbitration agreement excludes the jurisdiction of national courts, it
is essential that the parties consent, either expressly or impliedly, to submit their
dispute to the arbitral tribunal.
145. The second and third proposition of law states that a non-signatory party may
claim through or under a signatory party by virtue of its legal or commercial
relationship with the latter. However, this proposition is contrary to the common law
position as evidenced in Sancheti (supra) and Tanning Research Laboratories (supra)
according to which a mere legal or commercial connection is not sufficient to allow a
non-signatory to claim through or under a party to the arbitration agreement. In A.
Ayyasamy (supra), this Court observed that the Arbitration Act should be interpreted "so
as to bring in line the principles underlying its interpretation in a manner that is
consistent with prevailing approaches in the common law world." Therefore, even
though a subsidiary derives interests or benefits from a contract entered into by the
company within a group, they would not be covered under the expression "claiming
through or under" merely on the basis that it shares a legal or commercial relationship
with the parties.
146. One of the questions that has been referred before us is whether the phrase
"claiming through or under" in Section 8 could be interpreted to include the group of
companies doctrine. The group of companies doctrine is founded on the mutual
intention of the parties to determine if the non-signatory entity within a group could be
made a party to the arbitration agreement in its own right. Such non-signatory entity is
not "claiming through or under" a signatory party. As mentioned above, the phrase
"claiming through or under" is used in the context of successors in interest that act in a
derivative capacity and substitute the signatory party to the arbitration agreement. To
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 in their own right. Therefore, we hold
that the approach of this Court in Chloro Controls (supra) to the extent that it traced the
group of companies doctrine to the phrase "claiming through or under" is erroneous and
against the well-established principles of contract and commercial law. As observed
above, the existence of the group of companies doctrine is intrinsically found on the
principle of the mutual intent of parties to a commercial bargain.
1 4 8 . Chief Justice N.V. Ramana also sought our consideration on the question of
whether the "group of companies doctrine" as expounded by Chloro Controls (supra)
and subsequent judgments is valid in law. 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, we deem it appropriate to retain
the doctrine which has held the field in Indian jurisprudence though by firmly
establishing it within the realm of the mutual consent or the mutual intent of the parties
to a commercial bargain. This will ensure on the one hand that Indian arbitration law
retains a sense of dynamism so as to respond to contemporary challenges. At the same
time, structuring the doctrine in the manner suggested so as to ground it in settled
principles governing the elucidation of mutual intent is necessary. This will ensure that
the doctrine has a jurisprudential foundation in party autonomy and consent to
arbitrate.
149. Although the issue before us largely concerns the application of the group of
companies doctrine in the Indian context, this Court cannot be oblivious to the changing
currents in the international arbitration jurisprudence. In deciding the contours of the
group of companies doctrine, we have reiterated the general legal proposition that non-
signatory persons or entities can also be bound by an arbitration agreement. The basis
for such joinder stems from the harmonious reading of Section 2(1)(h) along with
Section 7 of the Arbitration Act. Since the scope of this judgment was limited to the
group of companies doctrine, any authoritative determination given by this Court in the
course of this judgment should not be interpreted to exclude the application of other
doctrines and principles for binding non-signatories to arbitration agreements. However,
we also need to be mindful of the fact that the Indian courts and tribunals should not
adopt an overzealous approach to extending the jurisdiction of arbitral tribunals to non-
signatory parties merely on the ground that they are part of a corporate group.
150. In Cheran Properties (supra), this Court found the non-signatory to be "claiming
through or under" the signatory party to the arbitration agreement and not as a "party"
to the arbitration agreement. In that case, this Court was dealing with an issue
pertaining to enforcement of an arbitral award. On the available facts and
circumstances, the Court held that the non-signatory was a nominee of the signatory
party under the underlying commercial contract, and therefore was acting in a derivative
capacity. In Canara Bank (supra) this Court indirectly adopted the principle of estoppel
to bind the non-signatory on the basis that it had already participated in the judicial
proceedings before the High Court, and cannot subsequently deny being a party to the
proceedings before the arbitral tribunal. In Discovery Enterprises (supra), this Court
remanded the matter back to the arbitral tribunal to decide afresh the application for
discovery and inspection by applying the group of companies doctrine. Therefore, we
can conclude that the observations pertaining to the group of companies doctrine were
rendered in the facts and circumstances of each case. We have harmonized the
divergent strands of law emanating from these judgments in the preceding paragraphs.
1 5 1 . In Law's Empire, Ronald Dworkin proposed a hypothetical where a group of
novelists write a novel seriatim, each novelist interpreting the chapters given to them to
write a new chapter. 92 The novelists are expected to "take their responsibilities of
continuity more seriously" to create "a single unified novel that is the best it can be."93
Chloro Controls (supra) was the first chapter in the group of companies doctrine in
Indian arbitration jurisprudence. The series of subsequent judgments starting from
Cheran Properties (supra) and ending with Cox and Kings (supra) were the incremental
chapters - each adding further dimensions to the theory already propounded in the
previous chapters. In this case, we have added another chapter to the theory of group
of companies doctrine. Our aim was to make further progress in the course of evolution
of arbitration law. In the process, we have tweaked the plotline to make the novel a
more coherent read, instead of rewriting or discarding the previous chapters.
iii. Power of the Courts to issue directions Under Section 9
152. In Cox and Kings (supra), Chief Justice Ramana observed that establishing the
group of companies doctrine in the phrase "claiming through or under" creates an
anomalous situation where a party "claiming through or under" could be referred to an
arbitration agreement, but would not have a right to seek relief Under Section 9 of the
Arbitration Act. Section 9 allows a "party" to approach the court to seek interim
measures such as appointment of a guardian for a minor or person of unsound mind,
custody or sale of any goods which are the subject matter of the arbitration agreement,
and appointment of receiver.
153. The group of companies doctrine is based on determining the mutual intention to
join the non-signatory as a "veritable" party to the arbitration agreement. Once a
tribunal comes to the determination that a non-signatory is a party to the arbitration
agreement, such non-signatory party can apply for interim measures Under Section 9 of
the Arbitration Act. Establishing the legal basis for the application of the group of
companies doctrine in the definition of "party" Under Section 2(1)(h) read with Section
7 of the Arbitration Act resolves the anomality pointed out by Chief Justice Ramana.
G. The standard of determination at the referral stage - Sections 8 and 11
154. The last but not the least issue that arises for our consideration pertains to the
stage of applicability of the group of companies doctrine under the Arbitration Act. In
Cox and Kings (supra), Chief Justice Ramana observed that there is a need to have a
relook at the scope of judicial reference at the stage of Sections 8 and 11 of the
Arbitration Act considering the ambit of the unamended Section 2(1)(h). Section 5 of
the Arbitration Act provides that "no judicial authority shall intervene except where so
provided in this Part." The context for "so provided" is contained in Sections 8 and 11
which mandate the courts to refer the parties to arbitration. Under Section 8, the court
has to "prima facie" ascertain the existence of a valid arbitration agreement before
referring the parties to arbitration. Section 11 empowers the Supreme Court and High
Courts to appoint arbitrators on the failure of the parties to comply with the agreed
arbitration procedure. Section 11 could be invoked in situation where a dispute has
arisen and one of the parties to the arbitration agreement unsuccessfully invoked the
agreed procedure for the appointment of an arbitrator due to the non-cooperation of the
other party.
155. In SBP & Co v. Patel Engineering Ltd. MANU/SC/1787/2005 : (2005) 8 SCC 618,
a seven-Judge Bench of this Court was called upon to determine the scope of the
powers of the Chief Justice or their designate Under Section 11 of the Arbitration Act. It
was held that the Chief Justice or the designated judge will have the powers to
determine the jurisdiction to entertain the request, the existence of a valid arbitration
agreement, the existence of a live claim, the existence of the condition for the exercise
of their powers, and the qualifications of the arbitrators. Furthermore, it was held that
the Chief Justice has to decide whether there is an arbitration agreement as defined
under the Arbitration Act and whether the person who has made a request is party to
such an agreement.
156. In 2015, the Arbitration Act was amended to insert Section 11(6-A). The said
provision reads as follows:
(6A) The Supreme Court, or as the case may be, the High Court, while
considering any application Under Sub-section (4) or Sub-section (5) or (Sub-
section (6), shall, notwithstanding any judgment, decree, or order of any Court,
confine to the examination of the existence of an arbitration agreement.
By virtue of non-obstante clause, Section 11(6A) has set out a new position, which
takes away the basis of the position laid down in Patel Engineering (supra). In 2019,
the Parliament passed the Arbitration and Conciliation (Amendment) Act, 2019 omitting
Section 11(6-A). However, the amendment to Section 11(6-A) is yet to be notified. Till
such time, Section 11 as amended in 2015 will continue to remain in force.
157. When deciding the referral issue, the scope of reference under both Sections 8
and 11 is limited. Where Section 8 requires the referral court to look into the prima
facie existence of a valid arbitration agreement, Section 11 confines the court's
jurisdiction to the existence of the examination of an arbitration agreement.
1 5 8 . Section 16 of the Arbitration Act enshrines the principle of competence-
competence in Indian arbitration law. The provision 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.94 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.
159. In Vidya Drolia (supra), Justice N.V. Ramana (as the learned Chief Justice then
was) held that the amendment to Section 8 rectified the shortcomings pointed out in
Chloro Controls (supra) with respect to domestic arbitration. He further observed that
the issue of determination of parties to an arbitration agreement is a complicated
exercise, and should best be left to the arbitral tribunals:
239. [...] Jurisdictional issues concerning whether certain parties are bound by
a particular arbitration, under group-company doctrine or good faith, etc. in a
multi-party arbitration raises complicated factual questions, which are best left
for the tribunal to handle. The amendment to Section 8 on this front also
indicates the legislative intention to further reduce the judicial interference at
the stage of reference.
1 6 0 . In Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engineering Pvt. Ltd.
MANU/SC/0160/2021 : 2021:INSC:166 : (2021) 5 SCC 671, a Bench of three Judges
of this Court was called upon to decide an appeal arising out of a petition filed Under
Section 11(6) of the Arbitration Act for appointment of sole arbitrator. The issue before
the Court was the determination of existence of an arbitration agreement on the basis of
the documentary evidence produced by the parties. This Court prima facie opined that
there was no conclusive evidence to infer the existence of a valid arbitration agreement
between the parties. Therefore, the issue of existence of a valid arbitration agreement
was referred to be decided by the arbitral tribunal after conducting a detailed
examination of documentary evidence and cross-examination of witnesses.
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. The referral court should not 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. MANU/SC/0488/2005
: (2005) 7 SCC 234, this Court observed that there are distinct advantages to leaving
the final determination on matters pertaining to the validity of an arbitration agreement
to the tribunal:
74. [...] Even if the Court takes the view that the arbitral agreement is not
vitiated or that it is not valid, inoperative or unenforceable, based upon purely
a prima facie view, nothing prevents the arbitrator from trying the issue fully
rendering a final decision thereupon. If the arbitrator finds the agreement valid,
there is no problem as the arbitration will proceed and the award will be made.
However, if the arbitrator finds the agreement invalid, inoperative or void, this
means that the party who wanted to proceed for arbitration was given an
opportunity of proceedings to arbitration, and the arbitrator after fully trying
the issue has found that there is no scope for arbitration.
1 6 2 . In Chloro Controls (supra), this Court held that it is the legislative intent of
Section 45 of the Arbitration Act to give a finding on whether an arbitration agreement
is "null and void, inoperative and incapable of being performed" before referring the
parties to arbitration. In 2019, the expression "unless it prima facie finds" was inserted
in Section 45. In view of the legislative amendment, the basis of the above holding of
Chloro Controls (supra) has been expressly taken away. The present position of law is
that the referral court only needs to give a prima facie finding on the validity or
existence of an arbitration agreement.
163. In Deutsche Post Bank Home Finance Ltd. v. Taduri Sridhar MANU/SC/0262/2011
: (2011) 11 SCC 375, a two- Judge Bench of this Court held that when a third party is
impleaded in a petition Under Section 11(6) of the Arbitration Act, the referral court
should delete or exclude such third party from the array of parties before referring the
matter to the tribunal. This observation was made prior to the decision of this Court in
Chloro Controls (supra) and is no longer relevant in light of the current position of law.
Thus, when a non-signatory person or entity is arrayed as a party at Section 8 or
Section 11 stage, the referral court should prima facie determine the validity or
existence of the arbitration agreement, as the case may be, and leave it for the arbitral
tribunal to decide whether the non- signatory is bound by the arbitration agreement.
1 6 4 . In case of joinder of non-signatory parties to an arbitration agreement, the
following two scenarios will prominently emerge: first, where a signatory party to an
arbitration agreement seeks joinder of a non-signatory party to the arbitration
agreement; and second, where a non-signatory party itself seeks invocation of an
arbitration agreement. In both the scenarios, the referral court will be required to prima
facie Rule on the existence of the arbitration agreement and whether the non-signatory
is a veritable party to the arbitration agreement. In view of the complexity of such a
determination, the referral court should leave it for the arbitral tribunal 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. The tribunal can delve
into the factual, circumstantial, and legal aspects of the matter to decide whether its
jurisdiction extends to the non-signatory party. In the process, the tribunal should
comply with the requirements of principles of natural justice such as giving opportunity
to the non-signatory to raise objections with regard to the jurisdiction of the arbitral
tribunal. This interpretation also gives true effect to the doctrine of competence-
competence by leaving the issue of determination of true parties to an arbitration
agreement to be decided by arbitral tribunal Under Section 16.
H. Conclusions
165. In view of the discussion above, we arrive at the following conclusions:
a. The definition of "parties" Under Section 2(1)(h) read with Section 7 of the
Arbitration Act includes both the signatory as well as non-signatory parties;
b. Conduct of the non-signatory parties could be an indicator of their consent to
be bound by the arbitration agreement;
c. The requirement of a written arbitration agreement Under Section 7 does not
exclude the possibility of binding non-signatory parties;
d. Under the Arbitration Act, the concept of a "party" is distinct and different
from the concept of "persons claiming through or under" a party to the
arbitration agreement;
e. The underlying basis for the application of the group of companies doctrine
rests on maintaining the corporate separateness of the group companies while
determining the common intention of the parties to bind the non- signatory
party to the arbitration agreement;
f. The principle of alter ego or piercing the corporate veil cannot be the basis
for the application of the group of companies doctrine;
g. The group of companies doctrine has an independent existence as a principle
of law which stems from a harmonious reading of Section 2(1)(h) along with
Section 7 of the Arbitration Act;
h. To apply the group of companies doctrine, the courts or tribunals, as the
case may be, have to consider all the cumulative factors laid down in Discovery
Enterprises (supra). Resultantly, the principle of single economic unit cannot be
the sole basis for invoking the group of companies doctrine;
i. The persons "claiming through or under" can only assert a right in a
derivative capacity;
j. The approach of this Court in Chloro Controls (supra) to the extent that it
traced the group of companies doctrine to the phrase "claiming through or
under" is erroneous and against the well-established principles of contract law
and corporate law;
 k. The group of companies doctrine should be retained in the Indian arbitration
jurisprudence considering its utility in determining the intention of the parties
in the context of complex transactions involving multiple parties and multiple
agreements;
l. At the referral stage, the referral court should leave it for the arbitral tribunal
to decide whether the non-signatory is bound by the arbitration agreement; and
m. In the course of this judgment, any authoritative determination given by this
Court pertaining to the group of companies doctrine should not be interpreted
to exclude the application of other doctrines and principles for binding non-
signatories to the arbitration agreement.
166. We answer the questions of law referred to this Constitution Bench in the above
terms. The Registry shall place the matters before the Regular Bench for disposal after
obtaining the directions of the Chief Justice of India on the administrative side.
Pamidighantam Sri Narasimha, J.
Index
A. Introduction
B. Civil Remedy and Arbitration
i. Arbitration Agreement is a Contract
ii. Section 7(4)(b)
C. Group of Companies Doctrine
i. International Perspectives
ii. Indian Precedents on the Group of Companies Doctrine
D. Group of Companies Doctrine in the Context of Section 7
E. Conclusion
A. Introduction
167. The reference to this Constitution Bench is for an authoritative determination of
the applicability of the 'Group of Companies doctrine' to proceedings under the
Arbitration and Conciliation Act, 1996,95 and if found to be applicable and statutorily
anchored, to delineate its precise contours.
168. In the reference order, Chief Justice N.V. Ramana highlighted the variations in the
exposition and application of the doctrine as it has evolved in India. He questioned the
statutory source of the doctrine in the phrase "claiming through or under", which
appears in Sections 8 and 45 of the Act. He also cautioned that maintaining the separate
legal identities of members within the same group of companies is a fundamental
principle of corporate and contract law. In this light, the specific questions formulated
and referred to this Constitution Bench by Chief Justice N.V. Ramana,96 are as follows:
(a) Whether phrase "claiming through or under" in Sections 8 and 1197 could
be interpreted to include "Group of Companies" doctrine?
(b) Whether the "Group of Companies" doctrine as expounded by Chloro
Controls case98 and subsequent judgments are valid in law?99
169. Justice Surya Kant concurred with Chief Justice Ramana and supplemented his
reasons for reference. At the outset, he emphasised the need to retain the doctrine in
India to keep pace with the complexity of multi-party business transactions, where
certain persons do not formally sign the contract but are involved in its negotiation and
performance. Especially in India, with large number of family-run business groups, he
expressed that the inclusion of the non-signatory company is essential for effective and
complete dispute resolution through arbitration. However, he also indicated the need to
iron out inconsistencies in the formulation of the doctrine. He questioned the reliance
on equity considerations and 'single economic reality' to determine non-signatories to
be parties, as these undermine well-entrenched principles of party autonomy and
separate legal entity. In this light, for an authoritative determination of the contours of
the doctrine, he framed the following questions:
(a) Whether the Group of Companies doctrine should be read into Section 8 of
the Act or whether it can exist in Indian jurisprudence independent of any
statutory provision?
(b) Whether the Group of Companies doctrine should continue to be invoked on
the basis of the principle of "single economic reality"?
(c) Whether the Group of Companies doctrine should be construed as a means
of interpreting the implied consent or intent to arbitrate between the parties?
(d) Whether the principles of alter ego and/or piercing the corporate veil can
alone justify pressing the Group of Companies doctrine into operation even in
the absence of implied consent?100
170. I have had the advantage of going through the erudite and comprehensive opinion
of the learned Chief Justice. While I agree with his reasoning and conclusions, I
consider it necessary to supplement them with my own reasoning on some important
aspects. The broad question before us relates to the 'parties' to an 'arbitration
agreement'. This question must take us to Section 7 of the Act that defines an
'arbitration agreement' as under:
7 . Arbitration agreement.-(1) In this Part, "arbitration agreement" means an
agreement by the parties to submit to arbitration all or certain disputes which
have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration Clause in a
contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in-
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of
telecommunication including communication through electronic means which
provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of
the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration Clause
 constitutes an arbitration agreement if the contract is in writing and the
reference is such as to make that arbitration Clause part of the contract.
171. It is evident from the above-referred statutory prescription that an 'arbitration
agreement' is described in Sub-section (1) of Section 7 as, "an agreement by the
parties". Both these expressions, 'agreement' and 'parties' are important for our
consideration. For a proper understanding of these expressions, it is necessary to
examine the place of arbitration as a dispute redressal mechanism in the larger body of
institutional remedies in civil law.
B. Civil Remedy and Arbitration
172. In our legal system, access to civil courts is a standard judicial remedy. Civil
courts have the jurisdiction to try all civil suits,101 and any agreement to restrict the
remedy is declared void Under Section 28 of the Indian Contract Act, 1872.102 However,
exceptions to Section 28 save a "contract to refer to arbitration" any dispute that has
arisen or may arise between two or more persons.103 Thus, a restriction on accessing
civil remedy is saved Under Section 28 of the Contract Act, if there is a contract to
arbitrate.
173. A 'contract' is defined under the Contract Act as an agreement enforceable by
law.104 Agreement105 is formed when a promise or mutual promises (defined in Section
2(b))106 are reciprocated with a consideration (defined in Section 2(d))107, and these
promises can either be express (when its proposal or acceptance is in words) or implied
(when its proposal or acceptance is otherwise than in words).108 An agreement is
legally enforceable as a contract if it is formed with the free consent of parties who are
competent to contract, for a lawful consideration and lawful object.109
i. Arbitration Agreement is a Contract
174. An arbitration agreement is more specifically defined in Section 7(1) of the 1996
Act as an "an agreement by the parties to submit to arbitration all or certain disputes
which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not." The use of the phrase 'whether contractual or
not' qualifies the dispute, not the agreement; an arbitration agreement must always be
a contract, but the dispute that is referred to arbitration need not necessarily be
contractual, suffice it to be arising out of a "defined legal relationship".110
175. Arbitration Agreement must be in writing, as against an oral agreement. However,
it need not be signed document: India has adopted the UNCITRAL model111 which lays
emphasis on the substance of an agreement, rather than its form, to determine the
existence of the agreement to arbitrate. Sub-section (2) of Section 7 incorporates this
principle and recognises an agreement, either in the form of an arbitration Clause in the
contract or in the form of a separate agreement.
176. Section 7(3) mandates that an arbitration agreement shall be in writing, meaning
that the arbitration agreement must be in express terms. Subsequently, Section 7(4)
declares that an arbitration agreement "is in writing" if it is contained in: (a) a
document signed by the parties; (b) exchange of correspondence that provides the
record of the agreement; and (c) admission in the proceedings, i.e., the statement of
claim and defence. It is evident from the deliberate language of Section 7 that the
arbitration agreement must be in a written form, in contradistinction to an oral
agreement, and at the same time, that it is not necessary for it to be signed by the
parties.112 A signed document containing the arbitration agreement is only one of the
written forms, where the signature of the party is absolute proof for the existence and
privity of the contract.
177. Section 7 therefore comprehensively defines what an arbitration agreement is and
also from where it is to be identified. The referral court Under Sections 8, 11 or 45 of
the Act, or the arbitral tribunal, is the forum that identifies and deciphers the existence
of an arbitration agreement and its parties. The real question, however, is how must the
court or tribunal make this determination, particularly when a non-signatory seeks to
initiate arbitration, or is sought to be made party by a signatory. Apart from the
standard methods of drawing inferences by interpreting the express language employed
in the agreement, what are the other external aids to assist the court or the arbitral
tribunal in constructing the existence of the arbitration agreement with the non-
signatory, is the question that we are called upon to answer.
ii. Section 7(4)(b)
178. An arbitration agreement with non-signatories is to be inferred from the record of
the agreement consisting the exchange of correspondence such as letters, telex,
telegrams, and other telecommunication and electronic communication, wherein it
"unequivocally and clearly emerge(s) that the parties were ad idem".113 In Rickmers
Verwaltung Gmbh v. Indian Oil Corporation Ltd.,114 this Court referred to the role of
courts while considering the existence of an arbitration agreement as under:
1 2 . ...The question, however, is: can any agreement be spelt out from the
correspondence between the parties in the instant case?
13. In this connection the cardinal principle to remember is that it is the duty
of the court to construe correspondence with a view to arrive at a conclusion
whether there was any meeting of mind between the parties, which could create
a binding contract between them but the court is not empowered to create a
contract for the parties by going outside the clear language used in the
correspondence, except insofar as there are some appropriate implications of
law to be drawn. Unless from the correspondence, it can unequivocally and
clearly emerge that the parties were ad idem to the terms, it cannot be said that
an agreement had come into existence between them through correspondence.
The court is required to review what the parties wrote and how they acted and
from that material to infer whether the intention as expressed in the
correspondence was to bring into existence a mutually binding contract. The
intention of the parties is to be gathered only from the expressions used in the
correspondence and the meaning it conveys and in case it shows that there had
been meeting of mind between the parties and they had actually reached an
agreement upon all material terms, then and then alone can it be said that a
binding contract was capable of being spelt out from the correspondence.
14. From a careful perusal of the entire correspondence on the record, we are
of the opinion that no concluded bargain had been reached between the parties
as the terms of the standby letter of credit and performance guarantee were not
accepted by the respective parties. In the absence of acceptance of the standby
letter of credit and performance guarantee by the parties, no enforceable
agreement could be said to have come into existence. The correspondence
exchanged between the parties shows that there is nothing expressly agreed
 between the parties and no concluded enforceable and binding agreement came
into existence between them. Apart from the correspondence relied upon by the
learned Single Judge of the High Court, the fax messages exchanged between
the parties, referred to above, go to show that the parties were only negotiating
and had not arrived at any agreement. There is a vast difference between
negotiating a bargain and entering into a binding contract. After negotiation of
bargain in the present case, the stage never reached when the negotiations
were completed giving rise to a binding contract...
Further in Babanrao Rajaram Pund v. Samarth Builders and Developers
MANU/SC/1113/2022 : 2022:INSC:935 : (2022) 9 SCC 691, this Court held:
2 9 . It is thus imperative upon the courts to give greater emphasis to the
substance of the clause, predicated upon the evident intent and objectives of
the parties to choose a specific form of dispute resolution to manage conflicts
between them. The intention of the parties that flows from the substance of the
agreement to resolve their dispute by arbitration are to be given due weightage.
It is crystal clear to us that Clause 18, in this case, contemplates a binding
reference to arbitration between the parties and it ought to have been given full
effect by the High Court.
The parties must mutually intend to refer their differences to arbitration as consent is
the source of the arbitral tribunal's jurisdiction over them.115
1 7 9 . The settled jurisprudence Under Section 7(4)(b) is that the non-signatory's
consent to an arbitration agreement can be made out from its conduct by way of
exchange of letters, telegrams and other forms of written communication.116 These
correspondences constitute the written record of the agreement. In Smita Conductors v.
Euro Alloys MANU/SC/0535/2001 : (2001) 7 SCC 728 [2001 INSC 417], this Court
was tasked with determining whether certain correspondences by the Appellant therein,
that were not addressed to the Respondent, showed the Appellant's consent to
arbitration as per the Article II(2) of the New York Convention, under the Foreign
Awards (Recognition and Enforcement) Act, 1961. The Court noted that the contracts
containing the arbitration Clause were not signed by the Appellant, nor were there any
letters or telegrams between the Appellant and Respondent where the Appellant
expressly assented to these contracts. Rather, it relied on correspondences by the
Appellant to a bank where it acted in pursuance of the terms of the contract, as
providing a record of the arbitration agreement.117 Therefore, even in the absence of a
signature, the non-signatory's consent to arbitration can be gathered from its written
correspondence (even with third parties) that shows its conduct pursuant to the contract
containing the arbitration agreement.
180. This principle has been consistently applied by the Court to determine whether the
non-signatory is a party to an arbitration agreement in accordance with Section 7(4)
(b).118 Our courts and tribunals have sufficiently developed the interpretive tools to
determine the intention of the parties to refer disputes to arbitration by construing the
express language in the correspondence. It has also been held that once the terms of
the contract show that there is an intention to refer disputes to arbitration, parties
cannot "wriggle out" of the arbitration agreement.119
181. Having considered the statutory scheme and also the consistent approach of this
Court in interpreting and construing the existence or lack of intention to arbitrate, the
following principle can be restated:
i. An arbitration agreement is a contract. It must meet the requirements of an
agreement enforceable by law under the Indian Contract Act, 1872.120
ii. Section 7(2) of the Arbitration and Conciliation Act, 1996 recognises the
existence of an arbitration agreement in substance, rather than in form.121 The
agreement may be in the form of an arbitration Clause in a contract or it may
be in the form of a separate agreement.
iii. Section 7(3) mandates that the arbitration agreement shall be in writing, as
against an oral agreement. However, the written form of the document
evidencing the agreement need not be signed by the parties.122
iv. 'Party' is defined in Section 2(1)(h) as "a party to an arbitration agreement".
The determination of the arbitration agreement and its parties are inextricably
connected with one another, their existence is based on the written agreement.
v. If the arbitration agreement is evidenced in the written form as contained in
a document signed by the parties (Section 7(4)(a)), the parties to the
agreement are evidently those who have signed the agreement.
vi. If the arbitration agreement is evidenced in the written form as contained as
admissions in pleadings comprising statements of claim and defence (Section
7(4)(c)), parties to this agreement would be evident from the statements of
claim and defence and the admissions made therein.
vii. The arbitration agreement may also be in writing if it is contained in the
record of the agreement comprising exchange of letters, telex, telegrams or
other means of telecommunication including communication through electronic
means (Section 7(4)(b)). In these instances, parties to the agreement as well
as the existence of the arbitration agreement is a matter of interpretation and
construction by the referral court or arbitral tribunal. The inquiry Under Section
7(4)(b) is to determine whether there exists an agreement for referring the
matter to arbitration, and who are the parties to such an agreement.
viii. The referral court or the arbitral tribunal, while considering the claim of a
non-signatory for reference, or the objection of a non-signatory to the inclusion
in an arbitration, will primarily examine the record of agreement Under Section
7(4)(b) and consider the express language employed by the parties.
ix. Once the express terms are ascertained,123 their meaning is a matter of
construction by the court or arbitral tribunal. The object of such construction is
to discover the intention of the parties.124 Intention must always be ascertained
through the words actually used, for there is no intention independent of the
language employed by the parties.
x. For the purpose of ascertaining the true meaning of the express words, the
court or tribunal may also look into the surrounding circumstances such as the
nature and object of the contract,125 and conduct of the parties during the
formation, implementation, and discharge of the contract.126
Trade practices also assume importance in determining the meaning of the
 language employed by the parties.127 While interpreting the contract, courts or
tribunals adopt well- established principles of construction. These principles are
in the nature of guidelines for the court to presume the intention of the parties.
xi. As the arbitration agreement is confined to a written document contained in
the material specified in Section 7(4)(b) and the interpretation and construction
is based on its text, Sections 91 and 92 of the Indian Evidence Act, 1872
disable adducing of oral evidence.128 This is necessary to prevent a referral
proceeding from being converted into a full-fledged trial. If the arbitration
agreement cannot be deduced from the record of agreement as provided in
Section 7(4)(b), the inquiry must conclude. This approach is in consonance
with the requirement of a written agreement and also subserves the important
policy consideration as surmised in Section 5 of the Act.
1 8 2 . It is in the context of the above referred legal regime, statutory as well as
precedential, that we need to consider the questions referred to this Constitution Bench
- whether the Group of Companies Doctrine is part of Indian arbitration jurisprudence
and whether it has any statutory basis.
C. Group of Companies Doctrine
i. International Perspectives
183. I am in complete agreement with the opinion of the learned Chief Justice, who has
in his scholarly exposition considered this matter in great detail. He has examined the
precedents on the applicability of the doctrine in France, England, Switzerland, and the
USA.
1 8 4 . The Group of Companies Doctrine was formulated and initially applied by
international arbitral tribunals to determine whether a person who has not formally
signed an arbitration agreement can be made party to it. It is one of the various legal
theories used to determine whether a non-signatory is a party to the arbitration
agreement. Before we proceed to the doctrine itself, it may be relevant for us to briefly
set out the other legal bases, so as to locate the doctrine in the broader jurisprudence
on non- signatories being a party.
1 8 5 . The legal bases for making a non-signatory a party can be classified as
consensual and non-consensual. The consensual theories that are focused on
determining the mutual intent of the parties include agency, implied consent, and
assignment and transfer of contractual rights, and the non-consensual theories that are
based on equity considerations include alter ego/ piercing the corporate veil, estoppel,
succession, and apparent authority. 129 The formulation of these principles, whether
consensual or non- consensual, is not new. They are derived from general principles of
contractual law and corporate law.130
186. The Group of Companies doctrine was formulated and theorised exclusively in
international arbitration jurisprudence to specifically determine whether a company
which is a non-signatory is party to the arbitration agreement. Gary Born clarifies that
this principle is not evoked outside the context of arbitration.131
1 8 7 . With this background, I will now discuss the doctrine along with other
considerations and legal tests that guide its application.
188. The doctrine was first developed by a French arbitral tribunal in an interim award
by the International Chamber of Commerce in Dow Chemical v. Isover Saint Gobain.132
In this case, Dow Chemical A.G. and Dow Chemical Europe (fully-owned subsidiaries of
Dow Chemical Company (USA)) were signatories to two separate agreements containing
arbitration clauses with Isover Saint Gobain. Dow Chemical France, a non-signatory to
these agreements but a member of the Dow group, effectuated the deliveries under
these agreements. When disputes arose and Isover instituted suits in the French courts
against all four Dow companies, both the signatory and the non-signatory Dow
companies instituted arbitral proceedings. Isover objected to the arbitral tribunal's
jurisdiction to render an award with respect to Dow Chemical France and Dow Chemical
Company (USA), as they were non-signatories. On the other hand, the non-signatory
companies argued that they can invoke arbitration due to their involvement in the
conclusion and performance of these contracts, and by virtue of them being in the same
group of companies.
189. The Arbitral Tribunal applied French law to determine whether the non-signatories
are parties "by reference to the common intent of the parties to these proceedings, such
as it appears from the circumstances that surround the conclusion and characterize the
performance and later the termination of the contracts in which they appear". It held
that Dow Chemical France and Dow Chemical Company (USA) were central to the
negotiation and conclusion of both contracts. Further, they were also involved in the
performance of the contracts and their subsequent termination since Dow Chemical
France effected the deliveries and Dow Chemical Company (USA) owned the trademarks
for the goods and also exercised absolute control over its subsidiaries. Relying on these
facts, the Tribunal concluded that both companies participated in the conclusion,
performance, and termination of the contracts. It held:
Considering that irrespective of the distinct juridical identity of each of its
members, a group of companies constitutes one and the same economic reality
(une realite economique unique) of which the arbitral tribunal should take
account when it Rules on its own jurisdiction subject to Article 13 (1955
version) or Article 8 (1975 version) of the ICC Rules.
Considering, in particular, that the arbitration Clause expressly accepted by
certain of the companies of the group should bind the other companies which,
by virtue of their role in the conclusion, performance, or termination of the
contracts containing said clauses, and in accordance with the mutual intention
of all parties to the proceedings, appear to have been veritable parties to these
contracts or to have been principally concerned by them and the disputes to
which they may give rise.133
1 9 0 . From the above extracts, it is clear that membership in the same group of
companies or "same economic reality" were neither the sole nor the guiding factors to
hold that the non-signatory companies were parties. Rather, the Tribunal's emphasis
was on the mutual intent of the parties, gathered from their conduct in the conclusion,
performance, and termination of the contracts.134
1 9 1 . The subsequent exposition and application of the doctrine by French arbitral
tribunals and courts also largely reflects a focus on mutual intent, rather than mere
membership in the same group, which has been held to be insufficient in and of itself to
make the non-signatory a party. 135 In Dallah Real Estate and Tourism Holding Co. v.
Ministry of Religious Affairs, Government of Pakistan, the Paris Court of Appeal enforced
the arbitral award against the Pakistan government (non-signatory) as its conduct
through involvement in the negotiation and performance of the contract reflected
common will to be a party to the arbitration.136 Common will must be ascertained
according to the principles of good faith (parties must not be allowed to evade
commitments) and effectiveness (when parties insert an arbitration clause, it must be
presumed that their intent is to be governed by the arbitration).137
1 9 2 . The focus on mutual intention reflects a fundamental difference between the
Group of Companies doctrine and 'piercing the veil' or alter ego. In veil-piercing, the
separate legal identities of the parent and subsidiary companies are disregarded or
nullified on equity and fairness considerations (such as to prevent fraud). Application of
the Group of Companies doctrine does not result in lifting the corporate veil, and is
rather based on identifying the mutual intention of the parties.138
193. The doctrine has not been accepted in the same terms across the world.
194. In UK, in Peterson Farms Inc v. C&M Farming Ltd.,139 the Court rejected the
applicability of the doctrine in English law. The separate legal identities of the parent
and subsidiary companies is held to be a fundamental legal tenet.140 In the Dallah case,
the UK Supreme Court differed from the Paris Court of Appeal on enforcing the arbitral
award against the Government of Pakistan (non-signatory). Even after applying French
law to determine when a non-signatory is a party, based on the material before it, the
Court held there was no mutual intention in this case to make the Government of
Pakistan a party. 141 Similarly, in Kabab-Ji SAL (Lebanon) v. Kout Food Group (Kuwait)
MANU/UKSC/0049/2021 : [2021] UKSC 48, the UK Supreme Court did not enforce the
arbitral award against the non-signatory company as there was no material to show that
it was a party as per the terms of the contract.
195. Similarly, Singapore courts have also rejected the applicability of the Group of
Companies doctrine by emphasising the fundamental corporate law principle of separate
legal identities.142
196. Swiss courts, on the other hand, have allowed for non- signatories to be made
party to the arbitration agreement based on their conduct, manifesting implied consent.
The Swiss Federal Court has held that an arbitration agreement must itself be in writing
as per Article 178 of the Swiss Private International Law Act. However, the question of
whether a non-signatory is a party to such written arbitration agreement can be
determined by reference to its involvement in the preparation and performance of the
contract containing the arbitration clause, which reflects its intent to be party to such
arbitration agreement.143
197. American courts also do not expressly rely on the Group of Companies doctrine to
determine whether a non-signatory is a party. Rather, they use principles such as
equitable estoppel, assumption, piercing the corporate veil, alter ego, and waiver. 144 In
the recent decision in GE Energy Power Conversion v. Outokumpu Stainless, the US
Supreme Court relied on equitable estoppel to hold that a non-signatory can compel
arbitration where a signatory is relying on terms of the contract to make its claim
against the non-signatory. 145 American courts have also relied on implied consent,146
third party beneficiary, 147 and general contractual and agency law principles to hold
that a non-signatory is a party.148
198. This comparative perspective makes it clear that a determination of parties to an
arbitration agreement that is based on mutual intention can take place without reference
to whether the non-signatory is a part of the group of companies. In fact, Bernard
Hanotiau, an international arbitration scholar, argues that the award in Dow Chemical
has been misinterpreted to give rise to the Group of Companies doctrine. Rather, he
emphasises that the real implication of Dow is that it enables us to determine whether a
non-signatory is a party by reference to its conduct that reflects its consent. In this
light, he argues that any reference to a group of companies is unnecessary as
membership within the same group is not a determinative factor in the inquiry of who is
a party to the arbitration agreement.149
199. The conclusions from the above analysis can be succinctly put forth as follows:
i. Various jurisdictions use both consensual and non- consensual legal
principles to determine whether a non- signatory is a party to an arbitration
agreement.150
ii. The Group of Companies doctrine is applied irrespective of the distinct
juridical identities of each member of the group when they share a common
economic reality by virtue of their role in the formation, performance, and
termination of the contract. The principle is based on mutual intention of all the
parties to settle the dispute through arbitration.151
iii. The acceptance of the doctrine is highly contested across jurisdictions. The
doctrine was developed in France and is applied there by emphasising mutual
consent of the signatory and non-signatory companies.152
iv. On the other hand, countries like the United Kingdom153 and Singapore154
have expressly rejected the doctrine and have emphasised the fundamentality of
separate legal personalities of members within the same group.
v. Some jurisdictions, such as Switzerland 155 and the USA,156 have not
accepted the Group of Companies doctrine in those terms. However, they
invoke other legal principles to hold a non-signatory to be a party to the
arbitration agreement (such as conduct, implied consent, contractual and
agency principles).
vi. American courts also solely rely on equity considerations (non-consensual)
to hold a non-signatory to be party, such as when they apply equitable estoppel
and veil piercing/alter ego.157
ii. Indian Precedents on the Group of Companies Doctrine
200. I will now consider the application of the Group of Companies doctrine by our
courts and formulate principles that arise from the precedents.
2 0 1 . I am in agreement with the detailed analysis of the Indian case-law on this
doctrine by the learned Chief Justice. The position of law in India can broadly be
divided as it existed before and after the decision in Chloro Controls (supra). I have
already referred to the decisions interpreting and applying Section 7(4)(b) in Part B(ii)
of my opinion. The decisions cited therein recognise the possibility of a non-signatory
company being a party to the arbitration. I have also referred to the reasoning in those
decisions where the Court has examined the record of the agreement and constructed
the existence of an arbitration agreement based on the express language, coupled with
the consent of the parties.
202. Two decisions of this Court which preceded Chloro Controls (supra), namely,
Sukanya Holdings158 and Indowind Energy159 were based on a strict interpretation of
Section 7 and considered that parties to an agreement are limited to its signatories.
203. There was a definitive shift in this position from the case of Chloro Controls v.
Severen Trent (supra). Arising out of the conspectus of a multi-party multi-contractual
dispute, a petition for reference to arbitration Under Section 45 of the Act was filed in a
suit, despite asymmetry in the parties to the contracts and the parties to the arbitration
agreement. Interpreting the words and phrases "any person", "claiming through or
under", and "shall" in Section 45 of the Court, this Court enlarged the scope of
reference for the first time, to bind non-signatories.
204. It noted that if a claim is made against or by someone who is not originally a
signatory to an arbitration agreement, the Group of Companies doctrine can bind the
"non-signatory affiliates or sister or parent concerns" to arbitration, "if the
circumstances demonstrate that the mutual intention of all the parties was to bind both
the signatories and the non-signatory affiliates."160 The Court noted in the following
words:
72. This evolves the principle that a non-signatory party could be subjected to
arbitration provided these transactions were with group of companies and there
was a clear intention of the parties to bind both, the signatory as well as the
non-signatory parties. In other words, "intention of the parties" is a very
significant feature which must be established before the scope of arbitration can
be said to include the signatory as well as the non-signatory parties.
73. A non-signatory or third party could be subjected to arbitration without their
prior consent, but this would only be in exceptional cases. The court will
examine these exceptions from the touchstone of direct relationship to the party
signatory to the arbitration 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...
(emphasis supplied)
205. In his opinion, the learned Chief Justice has considered the concern of Justice
Surya Kant about an apparent contradiction between the above-referred paragraphs 72
and 73, and has correctly reconciled the two paragraphs. I am in agreement with the
same.
206. In this context, it is critical to emphasize that the Court in Chloro Controls was
interpreting Section 45, in Part II of the Act, in particular, the phrase "claiming through
or under". The conclusion to include non-signatories to the arbitration agreement
pivoted on their derivative claim to being a party to the arbitration agreement. The
Group of Companies doctrine thus found recognition in the interpretation of the phrases
of Section 45 of the Act. Further, for the derivative action to pass muster, "a clear
intention" of the signatories and non-signatories had to be ascertained, through the
circumstances delineated by the Court, i.e., i) direct relationship with the party to the
agreement, ii) commonality of subject matter,
iii) composite nature of transaction, and iv) interlinked performance of the contract.
2 0 7 . In 2015, the Law Commission of India's 246th Report acknowledged this
interpretation of Section 45 to the Act. In the pursuant amendments, Section 8 in Part I
of the Act was amended to mirror the language of Section 45;161 thus, parties in
domestic arbitrations could also petition for reference to arbitration in a derivative
capacity.
208. We will now examine the application of the Group of Companies doctrine in the
subsequent cases. In Duro Felguera, S.A. v. Gangavaram Port Ltd.
MANU/SC/1352/2017 : 2017:INSC:1026 : (2017) 9 SCC 729, the application of the
doctrine as recognised in Chloro Controls (supra) was not applied on the facts of that
case.
209. Until now, the precedents pertained to situations where the parties invoked the
pre-referral jurisdiction of the courts. In Cheran Properties Ltd. v. Kasturi and Sons Ltd.
MANU/SC/0427/2018 : 2018:INSC:394 : (2018) 16 SCC 413, the Court was
approached at the enforcement stage.162 The Court allowed the enforcement of an
arbitral award against a subsequent purchaser of shares Under Section 35 of the Act,
interpreting the phrase "persons claiming under them". However, expositions pertaining
to the Group of Companies doctrine were observed in the judgment, in response to
certain arguments advanced before the Court. In that context, the Court made the
following observations:
2 3 . As the law has evolved, it has recognised that modern business
transactions are often effectuated through multiple layers and agreements.
There may be transactions within a group of companies. The circumstances in
which they have entered into them may reflect an intention to bind both
signatory and non-signatory entities within the same group. In holding a non-
signatory bound by an arbitration agreement, the court approaches the matter
by attributing to the transactions a meaning consistent with the business sense
which was intended to be ascribed to them. Therefore, factors such as the
relationship of a non- signatory to a party which is a signatory to the
agreement, the commonality of subject-matter and the composite nature of the
transaction weigh in the balance. The group of companies doctrine is essentially
intended to facilitate the fulfilment of a mutually held intent between the
parties, where the circumstances indicate that the intent was to bind both
signatories and non-signatories. The effort is to find the true essence of the
business arrangement and to unravel from a layered structure of commercial
arrangements, an intent to bind someone who is not formally a signatory but
has assumed the obligation to be bound by the actions of a signatory.163
210. The Court did not rely on the Group of Companies doctrine. Yet, Cheran (supra) is
an important case to demonstrate that a non-signatory company can be determined to
be a party to an arbitration agreement, based on factors such as relationship of the non-
signatory with the signatory parties, commonality of subject-matter, and composite
nature of transaction. It is also possible for the court to construct such an agreement
where the intention of a business arrangement is apparent and the non-signatories have
bound themselves by their conduct to fulfill such business arrangement.
2 1 1 . The subsequent decision in Ameet Lalchand Shah v. Rishabh Enterprises
 MANU/SC/0501/2018 : 2018:INSC:450 : (2018) 15 SCC 678 is yet another instance
where this Court has allowed a non-signatory to be party to an arbitration agreement, in
connected contracts, on the ground of business efficacy, noting that all agreements
were executed for a single commercial project. This approach was noted in the
subsequent decision of Discovery Enterprises,164 where learned Chief Justice has noted:
In Ameet Lalchand, the Court did not explicitly invoke the group of companies
doctrine to bind a non-signatory, rather it relied on Chloro Controls to hold that
a non-signatory would be bound by the arbitration Clause in the mother
agreement, since it is a party to an inter-connected agreement, executed to
achieve a common commercial goal.165
(emphasis supplied)
212. In Reckitt Benckiser (India) Pvt. Ltd. v. Reynders Label Printing India Pvt. Ltd.
MANU/SC/0859/2019 : 2019:INSC:700 : (2019) 7 SCC 62, the Court inferred that
since the non-signatory neither signed the arbitration agreement nor had any causal
connection with the negotiation or execution of the agreement, an intent to consent to
the arbitration agreement could not be discerned. Hence, the non-signatory was not
bound by the arbitration agreement.166 Thus, in Reckitt, the Court reverted to the
approach of ascertaining mutual intention of the parties for applying the doctrine,
although it did not result in the non- signatory being made a party to the arbitration.
213. MTNL v. Canara Bank MANU/SC/1057/2019 : 2019:INSC:881 : (2020) 12 SCC
767 is the decision which acknowledged the Group of Companies doctrine, formulated
its principles, and applied them to the proceedings by recognising CANFINA, a non-
signatory, to be party to the arbitration agreement. The Court held:
10.5. The group of companies doctrine has been invoked by courts and
tribunals in arbitrations, where an arbitration agreement is entered into by one
of the companies in the group; and the non-signatory affiliate, or sister, or
parent concern, is held to be bound by the arbitration agreement, if the facts
and circumstances of the case demonstrate that it was the mutual intention of
all parties to bind both the signatories and the non-signatory affiliates in the
group. The doctrine provides that a non-signatory may be bound by an
arbitration agreement where the parent or holding company, or a member of
the group of companies is a signatory to the arbitration agreement and the non-
signatory entity on the group has been engaged in the negotiation or
performance of the commercial contract, or made statements indicating its
intention to be bound by the contract, the non-signatory will also be bound and
benefitted by the relevant contracts.
10.6. The circumstances in which the "group of companies" doctrine could be
invoked to bind the non-signatory affiliate of a parent company, or inclusion of
a third party to an arbitration, if there is a direct relationship between the party
which is a signatory to the arbitration agreement; direct commonality of the
subject-matter; the composite nature of the transaction between the parties. A
"composite transaction" refers to a transaction which is interlinked in nature;
or, where the performance of the agreement may not be feasible without the
aid, execution, and performance of the supplementary or the ancillary
agreement, for achieving the common object, and collectively having a bearing
on the dispute.
 10.7. The group of companies doctrine has also been invoked in cases where
there is a tight group structure with strong organisational and financial links, so
as to constitute a single economic unit, or a single economic reality. In such a
situation, signatory and non-signatories have been bound together under the
arbitration agreement. This will apply in particular when the funds of one
company are used to financially support or restructure other members of the
group.
2 1 4 . Finally, in ONGC v. Discovery Enterprises Pvt. Ltd.,167 while the decision on
whether the non-signatory was a party was remitted to the arbitral tribunal, the Court
undertook a comprehensive review of the academic literature and judicial
pronouncements on the issue. The court compendiously concluded the following:
40. In deciding whether a company within a group of companies which is not a
signatory to arbitration agreement would nonetheless be bound by it, the law
considers the following factors:
(i) The mutual intent of the parties;
(ii) The relationship of a non-signatory to a party which is a signatory
to the agreement;
(iii) The commonality of the subject-matter;
(iv) The composite nature of the transaction; and
(v) The performance of the contract.
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...
215. What emerges from the aforementioned precedents is that:
i. The Group of Companies doctrine was adopted and applied in Indian
arbitration jurisprudence in Chloro Controls (supra), where the Court read the
doctrine into the phrase "claiming through or under" in Section 45. It held that
a non-signatory affiliate or sister or parent company can be a party to an
arbitration agreement if there is mutual intention of the signatories and non-
signatories to this effect. In order to determine mutual intention, the Court laid
down factors such as direct relationship, direct commonality of subject-matter,
and a composite transaction where the performance of multiple agreements is
inextricably connected.168
ii. Pursuant to the 2015 Amendment of Section 8, the Court made a composite
reference of signatories and non- signatories to arbitration by emphasising that
all agreements were executed for a single commercial project,169 but without
explicitly referring to the Group of Companies doctrine.170
iii. Subsequently, this Court relied on mutual intention as the test for the
doctrine. However, it deviated from Chloro (supra) by prescribing the non-
signatory's causal connection with the negotiation and execution of the contract
 as factors to determine its mutual intent to arbitrate.171
iv. In MTNL (supra), the Court summarised the test under the doctrine as being
based on the common intention of the parties to bind both signatory and non-
signatory members of the group of companies. Such common intention can be
inferred from the non-signatory's involvement in negotiation and performance
of the contract (similar to Reckitt Benckiser (supra)), or from its statements
that indicate its intention to be a party. 172 Simultaneously, the Court also
referred to the test in Chloro Controls (supra) for determining mutual
intention.173 Lastly, the Court held the doctrine to be applicable when there is a
tight group structure or single economic reality, without any reference to the
intention of the parties.174 However, the Court ultimately relied on implied or
tacit consent by the non-signatory, evidenced by its conduct, to hold that it is a
party.175
v. In Discovery (supra), the Court comprehensively reviewed the above cases
and ironed out the various tests formulated in them. It held that (a) mutual
intent of the parties, (b) relationship of the non-signatory to the signatory, (c)
commonality of subject-matter, (d) composite nature of transaction, and (e)
performance of the contract, are the factors to determine whether the non-
signatory is a party. 176 These factors emphasise mutual intention and draw
from the tests laid down in Chloro Controls and Reckitt Benckiser but do not
include the test of single economic reality as a determinative factor, as held in
MTNL (supra).
216. At this juncture, it is necessary to clarify and answer a common question referred
for our consideration, i.e., whether the Group of Companies doctrine is anchored in
Sections 8 and 45 of the Act. The expression "claiming through or under" employed in
Sections 8 and 45 is concerned with instances of succession and derivative rights.
Learned Chief Justice has dealt with this aspect in great detail in Part F (i) and (ii) of his
opinion and held that the doctrine cannot be anchored in Sections 8 and 45 and to this
extent, Chloro Controls (supra) is wrongly decided. I am in complete agreement with
his reasons and findings.
D. Group of Companies Doctrine in the Context of Section 7
217. In this reference, we are tasked to determine whether the Group of Companies
doctrine is in accord with the statutory regime of the Arbitration and Conciliation Act,
1996, defining an arbitration agreement and parties thereto. The adaptation of the
doctrine has been doubted, and that is the reason for this reference. While dealing with
the international perspective on the doctrine in Part C(i) of my opinion, it was noticed
that the doctrine could not attain any conceptual singularity, and it remains contested.
Perhaps, this is for two reasons: first, the expression 'single economic reality' employed
in Dow (supra) is not in line with the concept of separate legal personality of a
company, and second, the doctrine is applied for determining the intention of the
parties, which is completely fact-based. For these reasons, the doctrine has remained
dynamic, if not uncertain, and is subject to many qualifications and exceptions. At the
same time, there are certain advantages to adopting the doctrine, considering modern
business practices. I am of the opinion that it is necessary to entrench the doctrine
within the statutory regime of the Act, to enable a court or arbitral tribunal to apply it as
a principle to decipher the intention of the parties. I find it necessary to subsume the
doctrine of Group of Companies within the judicial process Under Section 7(4)(b),
where a court or arbitral tribunal is called upon to determine the existence of an
arbitration agreement and parties to it.
218. A conjoint reading of Section 9 of the Code of Civil Procedure and Section 28 of
the Indian Contract Act informs us that the jurisdiction of an arbitral tribunal to settle
disputes between the parties, to the exclusion of ordinary civil courts, must arise out of
a contract to arbitrate between them. An arbitration agreement, being a contract, must
necessarily be in writing, 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.
219. 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 record of
agreement to determine whether the non- signatory company is a party to it.
220. Although the application of the Group of Companies doctrine in India has until
now been independent of Section 7, its juxtaposition with Section 7(4)(b) case-law
shows that the inquiry under both is premised on determining the mutual intention of
parties to submit to arbitration. The mutual intention of the parties is discernible from
their conduct in the performance of the contract and this inquiry is common to Section
7(4)(b) jurisprudence and the Group of Companies doctrine. Even the precedents on the
doctrine, national and international, look to additional factors beyond the non-signatory
being in the same group of companies, such as commonality of subject-matter,
composite nature of transaction, and interdependence of the performance of the
contracts to determine mutual intent.
221. Since the fundamental issue before the court or tribunal Under Section 7(4)(b)
and the Group of Companies doctrine is the same, the doctrine can be subsumed within
Section 7(4)(b). Consequently, the record of agreement that evidences conduct of the
non-signatory in the formation, performance, and termination of the contract and
surrounding circumstances such as its direct relationship with the signatory parties,
commonality of subject-matter, and composite nature of transaction, must be
comprehensively used to ascertain the existence of the arbitration agreement with the
non-signatory. In this inquiry, the fact of a non-signatory being a part of the same
group of companies will strengthen its conclusion. In this light, there is no difficulty in
applying the Group of Companies doctrine as it would be statutorily anchored in Section
7 of the Act.
E. Conclusion
222. In view of the above, while concurring with the judgment of the learned Chief
Justice, my conclusions are as follows:
I. An agreement to refer disputes to arbitration must be in a written form, as
 against an oral agreement, but need not be signed by the parties. Under Section
7(4)(b), a court or arbitral tribunal will determine whether a non-signatory is a
party to an arbitration agreement by interpreting the express language
employed by the parties in the record of agreement, coupled with surrounding
circumstances of 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.
II. The Group of Companies doctrine177 is also premised on ascertaining the
intention of the non-signatory to be party to an arbitration agreement. The
doctrine requires the intention to be gathered from additional factors such as
direct relationship with the signatory parties, commonality of subject-matter,
composite nature of the transaction, and performance of the contract.
III. Since the purpose of inquiry by a court or arbitral tribunal Under Section
7(4)(b) and the Group of Companies doctrine is the same, the doctrine can be
subsumed within Section 7(4)(b) to enable a court or arbitral tribunal to
determine the true intention and consent of the non-signatory parties to refer
the matter to arbitration. The doctrine is subsumed within the statutory regime
of Section 7(4)(b) for the purpose of certainty and systematic development of
law.
IV. The expression "claiming through or under" in Sections 8 and 45 is intended
to provide a derivative right; and it does not enable a non-signatory to become
a party to the arbitration agreement. The decision in Chloro Controls (supra)
tracing the Group of Companies doctrine through the phrase "claiming through
or under" in Sections 8 and 45 is erroneous. The expression 'party' in Section
2(1)(h) and Section 7 is distinct from "persons claiming through or under
them". This answers the remaining questions referred to the Constitution
Bench.

1 "ArbitrationAct"
2 The reference to Section 11 seems inadvertent as the phrase "claiming through or
under" is not found in the said provision. Rather, Section 11 ought to be read as
Section 45 where the phrase "claiming through or under" appears.
3 "1940 Act"
4 "UNCITRAL"
5 "UNCITRAL Model Law"
6 UN General Assembly, Fortieth Session, 'Model Law on International Commercial
Arbitration of the United Nations Commission on International Trade Law' 40/72 (1985)
7 Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd.,
MANU/SC/0008/2021 : 2021:INSC:9 : (2022) 1 SCC 75
8 S.N. Prasad v. Monnet Finance Ltd., MANU/SC/0881/2010 : (2011) 1 SCC 320
9 Law Commission of India, 'Amendments to the Arbitration and Conciliation Act 1996',
Report No. 246 (August 2014)
10 "CANFINA"
11 Dow Chemical v. Isover Saint Gobain, Interim Award, ICC Case No. 4131, 23
September 1982
12 Bernard Hanotiau and Leonardo Ohlrogge, '40th Year Anniversary of the Dow
Chemical Award' 40(2) ASA Bulletin 300-308.
13 Paris Court of Appeal, 7 December 1994, V 2000 (formerly Jaguar France) v. Project
XS, Rev. Arb. (1996) 67.
14 Yves Derains, 'Is there a Group of Companies Doctrine?' in Bernard Hanotiau and Eric
Schwartz (eds) in Dossier of the ICC Institute of World Business Law, Volume 7, 131-
145.
15 A, B, C v. D and State of Libya, 4A_636/2018
16 Saudi Butec Ltd. et Al Fouzan Trading v. Saudi Arabian Saipem Ltd., unpublished ICC
Interim Award of 25 October 1994, confirmed by DFT on 29 January 1996, ASA Bulletin
(1996) Vol 3 p 496.
17 Decision 4A_376/2008 of 5 December 2008.
18 X v. Y Engineering S.p.A. and Y S.p.A., 4A_450/2013, ASA Bull., 160 (2015).
19 Audley William Sheppard, 'Third Party Non-Signatories in English Arbitration Law' in
Stavros Brekoulakis, Julian Lew, et al (eds) The Evolution and Future of International
Arbitration (Kluwer Law International, 2016) 183-198.
20 The Mayoralty and commonality & Citizens of the City of London v. Ashok Sancheti,
MANU/UKWA/0192/2008 : [2008] EWCA Civ 1283
21 Blackpool and Fylde Aero Club Ltd. v. Blackpool Borough Council,
MANU/UKWA/0003/1990 : [1990] 1 WLR 1195
22 Chitty on Contracts, Hugh Beale (ed), (32nd edn, Sweet and Maxwell, 2015) para 2-
169.
23 "Dallah"
24 Andrijana Misovic, 'Binding non-signatories to arbitrate: the United States approach'
(2021) 37(3) Arbitration International 749-768.
25 American Fuel Corp v. Utah Energy Development Co, Inc, 122 F.3d 130, 134 (2d Cir
1997)
26 American Bureau, Shipping v. Tencara Shipyard, MANU/FESC/0430/1999 : 170 F.3d
349, 353 (2d Cir 1999)
27 Sunkist Soft Drinks, Inc v. Sunkist Growers, Inc, MANU/FEEE/0084/1993 : 10 F.3d
753, 757 (11th Cir 1993)
28 Grigson v. Creative Artists Agency, LLC, MANU/FEFT/0012/2000 : 210 F.3d 524
(2000)
29 Bernard Hanotiau, 'May an Arbitration Clause be Extended to Non-signatories:
Individuals, States or Other Companies of the Group?' in Complex Arbitrations: Multi-
party, multi-contract, Multi-issue - A comparative study' Bernard Hanotiau (eds) (2nd
edn, 2020) 95, 194.
30 Gary Born, International Arbitration Law and Practice (3rd ed, 2021) 2.
31 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, MANU/SC/0090/2016
: 2016:INSC:96 : (2016) 4 SCC 126
32 Satish Kumar v. Surinder Kumar, MANU/SC/0264/1968 : (1969) 2 SCR 244
33 "Contract Act"
34 MANU/SC/0157/1968 : (1968) 3 SCR 662
35 Vidya Drolia v. Durga Trading Corporation, MANU/SC/0939/2020 : 2020:INSC:697 :
(2021) 2 SCC 1
36 MANU/SC/0008/1969 : (1969) 2 SCC 343
37 Gary Born (n 44) 1518.
38 United Steelworkers of America v. Warrior and Gulf Navigation,
MANU/USSC/0191/1960 : (1960) 363 US 574, 582
39 Pollock and Mulla, The Indian Contract and Specific Reliefs Act (14th edn, 2016) 235.
40 Stavros Brekoulakis, 'Rethinking Consent in International Commercial Arbitration: A
General Theory for Non-signatories' (2017) 8 Journal of International Dispute
Settlement 610.
41 Chitty on Contracts, Hugh Beale (ed) (32nd edn, Sweet and Maxwell, 2015) para 1-
104.
42 [2007] UKHL 40
43 Shakti Bhog Foods Limited v. Kola Shipping Ltd., MANU/SC/4185/2008 : (2009) 2
SCC 134; Trimex International FZE Ltd. v. Vedanta Aluminium Ltd.,
MANU/SC/0057/2010 : (2010) 3 SCC 1
44 MANU/SC/7970/2008 : (2008) 14 SCC 240
45 Govind Rubber Ltd. v. M/s. Louis Dreyfus Commodities, MANU/SC/1209/2014 :
(2015) 13 SCC 477
46 UNCITRAL Model Law on International Commercial Arbitration, Recommendation
regarding the interpretation of Article II, paragraph 2, and Article VII, paragraph 1, of
the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in
New York, 10 June 1958, (adopted by the UNCITRAL on 7 July 2006) 39.
47 Sundaram Finance Ltd. v. NEPC India Ltd., MANU/SC/0012/1999 : (1999) 2 SCC
479, para 9; P. Manohar Reddy and Bros v. Maharashtra Krishna Valley Development
Corporation, MANU/SC/8480/2008 : (2009) 2 SCC 494, para 27.
48 Redfern and Hunter on International Arbitration (7th edn, Oxford University Press,
2023) para 2.23.
49 Gary Born (n 44) 1531.
50 Jayati Sarkar, 'Business Groups in India' in Asli Coplan, Takashi Hikino, and James
Lincoln (eds) The Oxford Handbook of Business Groups (2010) 299
51 "2013 Act"
52 Balwant Rai Saluja v. Air India, MANU/SC/0732/2014 : 2014:INSC:561 : (2014) 9
SCC 407
53 Gary Born (n 44) 1545.
54 Delhi Development Authority v. Skipper Construction Co. (P) Ltd.,
MANU/SC/2416/1996 : (1996) 4 SCC 662
55 Kapila Hingorani v. State of Bihar, MANU/SC/0403/2003 : (2003) 6 SCC 1
56 Bank of Tokyo v. Karoon, MANU/UKWA/0080/1984 : (1986) 3 All ER 468
57 Kamla Devi v. Takhatmal Land MANU/SC/0300/1963 : AIR 1964 SC 859; Bangalore
Electricity Supply Co Ltd. v. E.S. Solar Power (P) Ltd., MANU/SC/0337/2021 :
2021:INSC:282 : (2021) 6 SCC 718
58 Bank of India v. K. Mohandas, MANU/SC/0491/2009 : (2009) 5 SCC 313; M.
Dayanand Reddy v. A.P. Industrial Infrastructure Corporation Ltd.,
MANU/SC/0337/1993 : (1993) 3 SCC 137
59 Union of India v. D.N. Revri, MANU/SC/0003/1976 : (1976) 4 SCC 147
60 Bernard Hanotiau, 'Consent to Arbitration: Do We Share a Common Vision?' (2011)
27(4) Arbitration International 539, 554
61 Gary Born (n 44) 1568.
62 Stavros Brekoulakis, 'Parties in International Arbitration: Consent v. Commercial
Reality' in Stavros Brekoulakis, Julian DM Lew, et al (eds) in 'The Evolution and Future
of International Arbitration' (2016) 119, 120.
63 UNCITRAL, 'Settlement of Commercial Disputes: Possible uniform Rules on certain
issues concerning settlement of commercial disputes: conciliation, interim measures of
protection, written form of arbitration agreement: Report of the Secretary General'
A/CN.9/WG.II/WP.108/Add.1 (26 January 2000)
64 Gary Born (n 44) 1563.
65 Hanotiau (n 85) 546.
66 Stavros Brekoulakis, 'Parties in International Arbitration: Consent v. Commercial
Reality' in Stavros Brekoulakis, Julian DM Lew, et al (eds) 'The Evolution and Future of
International Arbitration' (2016) 119, 137.
67 Gary Born (n 44) 1568.
68 Gary Born (n 44) 1559.
69 Gary Born (n 44) 1562.
70 Gary Born (n 44) 1567
71 Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan, MANU/SC/0359/1999 :
(1999) 5 SCC 651
72 UNIDROIT Principles of International Commercial Contracts, 2016, Article 4.3
73 Reliance Industries Ltd. v. Union of India, MANU/SC/0518/2014 : 2014:INSC:410 :
(2014) 7 SCC 603
74 Enercon (India) Ltd. v. Enercon Gmbh, MANU/SC/0102/2014 : 2014:INSC:100 :
(2014) 5 SCC 1
75 Gary Born (n 44) 1545.
76 Stavros Brekoulakis, 'Rethinking Consent in International Commercial Arbitration: A
General Theory for Non- signatories' (2017) 8 Journal of International Dispute
Settlement 610, 621.
77 Stavros Brekoulakis, 'Parties in International Arbitration: Consent v. Commercial
Reality' in Stavros Brekoulakis, Julian DM Lew, et al (eds) 'The Evolution and Future of
International Arbitration' (2016) 119, 148.
78 Ibid, at 121.
79 Brekoulakis (n 102) 629.
80 Karim Youssef, 'The Limits of Consent: The Right or Obligation to Arbitrate of Non-
Signatories in Group of Companies' in Multiparty Arbitration: Dossiers of the ICC
Institute of Worlds Business Law, Volume 7 (2010) 71, 79.
81 Russel on Arbitration (23rd edn, 2007) 99 para 3-018.
82 Schiffahrts-gesellschaft Detlev von Appen v. Voest Alpine Intertrading, [1997] EWCA
Civ 1420.
83 Through Transport Mutual Insurance Association (Eurasia) Ltd. v. New India
Assurance Co Ltd., MANU/UKCM/0061/2005 : [2005] EWHC 455 (Comm); West Tankers
Inc. v. Allianz Spa, MANU/UKWA/0869/2012 : [2012] EWCA Civ 27.
84 Section 82(2) of the English Arbitration Act, 1996
85 Vicky Priskich, 'Binding non-signatories to arbitration agreements - who are person
'claiming through or under' a party?' (2019) 35(3) Arbitration International 375-386.
86 Black's Law Dictionary (5th edn, 1979) 224
87 P Ramanatha Aiyar's, The Law Lexicon (1997) 330
88 Black's Law Dictionary (5th edn, 1979) 1328
89 P. Ramanatha Aiyar's, The Law Lexicon (1997) 331
90 Agri Gold Exims Ltd. v. Sri Lakshmi Knits & Wovens, MANU/SC/7045/2007 : (2007)
3 SCC 686
91 MANU/SC/1179/2016 : 2016:INSC:948 : (2016) 10 SCC 386
92 Ronald Dworkin, Law's Empire (Belknap Press, Harvard University Press 1986) 229.
93 Ibid.
94 Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field,
MANU/SC/1634/2019 : 2019:INSC:1292 : (2020) 2 SCC 455
95 Hereinafter referred to as the Act.
96 For himself and for Justice A.S. Bopanna.
97 The phrase "claiming through or under" does not appear in Section 11. Rather, the
reference to Section 11 must be read as Section 45 that contains this phrase.
98 Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.,
MANU/SC/0803/2012 : (2013) 1 SCC 641.
99 Cox and Kings Ltd. v. SAP India Pvt. Ltd., MANU/SC/0593/2022 : 2022:INSC:524 :
(2022) 8 SCC 1, para 54.
100 ibid, para 104.
101 Section 9 of the Code of Civil Procedure, 1908 reads:
"9. Courts to try all civil suits unless barred. -The Courts shall (subject to the provisions
herein contained) have jurisdiction to try all suits of a civil nature excepting suits of
which their cognizance is either expressly or impliedly barred. Explanation I.-A suit in
which the right to property or to an office is contested is a suit of a civil nature,
notwithstanding that such right may depend entirely on the decision of questions as to
religious rites or ceremonies.
Explanation II. -For the purposes of this section, it is immaterial whether or not any
fees are attached to the office referred to in Explanation I or whether or not such office
is attached to a particular place."
102 Hereinafter the 'Contract Act'. The relevant portion of Section 28, Indian Contract
Act, 1872 reads:
"28. Agreements in restraint of legal proceedings, void. -Every agreement, -
(a) by which any party thereto is restricted absolutely from enforcing his rights under or
in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or
which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto,
from any liability, under or in respect of any contract on the expiry of a specified period
so as to restrict any party from enforcing his rights, is void to that extent."
103 The relevant portion of Section 28, Indian Contract Act, 1872 reads:
"Exception 1. -Saving of contract to refer to arbitration dispute that may arise. -This
Section shall not render illegal a contract, by which two or more persons agree that any
dispute which may arise between them in respect of any subject or class of subjects
shall be referred to arbitration, and that only the amount awarded in such arbitration
shall be recoverable in respect of the dispute so referred.
Exception 2. -Saving of contract to refer questions that have already arisen.
-Nor shall this Section render illegal any contract in writing, by which two or more
persons agree to refer to arbitration any question between them which has already
arisen, or affect any provision of any law in force for the time being as to references to
arbitration."
104 Section 2(h) of the Indian Contract Act, 1872 reads:
"(h) An agreement enforceable by law is a contract;"
105 Section 2(e), Indian Contract Act 1872 reads:
"(e) Every promise and every set of promises, forming the consideration for each other,
is an agreement;"
106 Section 2(b), Indian Contract Act 1872 reads:
"(b) When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted. A proposal, when accepted, becomes a promise;"
107 Section 2(d), Indian Contract Act 1872 reads:
"(d) When, at the desire of the promisor, the promisee or any other person has done or
abstained from doing, or does or abstains from doing, or promises to do or to abstain
from doing, something, such act or abstinence or promise is called a consideration for
the promise;"
108 Section 9, Indian Contract Act 1872 reads:
"9. Promises, express and implied.-In so far as the proposal or acceptance of any
promise is made in words, the promise is said to be express. In so far as such proposal
or acceptance is made otherwise than in words, the promise is said to be implied."
109 Section 10, Indian Contract Act 1872 reads:
"10. What agreements are contracts. -All agreements are contracts if they are made by
the free consent of parties competent to contract, for a lawful consideration and with a
lawful object, and are not hereby expressly declared to be void."
110 Vidya Drolia v. Durga Trading Corporation, MANU/SC/0939/2020 : 2020:INSC:697
: (2021) 2 SCC 1, para 24; Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales
Service Ltd., MANU/SC/0008/2021 : 2021:INSC:9 : (2022) 1 SCC 753, para 30.
111 UNCITRAL Model Law on International Commercial Arbitration, 1985.
112 Jugal Kishore Rameshwardas v. Goolbai Hormusji, MANU/SC/0006/1955 : (1955) 2
SCR 857, para 7; Caravel Shipping Services (P) Ltd. v. Premier Sea Foods Exim (P) Ltd.,
MANU/SC/1252/2018 : 2018:INSC:1008 : (2019) 11 SCC 461, para 8.
113 Rickmers Verwaltung Gmbh v. Indian Oil Corporation Ltd., MANU/SC/0726/1998 :
(1999) 1 SCC 1, para 13.
114 ibid; also see MTNL v. Canara Bank, MANU/SC/1057/2019 : 2019:INSC:881 :
(2020) 12 SCC 767, para 9.3.
115 K.K. Modi v. K.N. Modi, MANU/SC/0092/1998 : (1998) 3 SCC 573, para 17; Bihar
State Mineral Development Corporation v. Encon Builders (I) Pvt. Ltd.,
MANU/SC/0611/2003 : (2003) 7 SCC 418, para 13.
116 Shakti Bhog Foods v. Kola Shipping Ltd., MANU/SC/4185/2008 : (2009) 2 SCC
134, para 17.
117 ibid, paras 6-7.
118 Unissi (India) Pvt. Ltd. v. Post Graduate Institute of Medical Education and Research,
MANU/SC/4495/2008 : (2009) 1 SCC 107; Powertech World Wide Ltd. v. Delvin
international General Trading LLC, MANU/SC/1333/2011 : (2012) 1 SCC 361; Govind
Rubber v. Louids Dreyfus Commodities Asia Pvt. Ltd., MANU/SC/1209/2014 : (2015)
13 SCC 477.
119 Unissi (India) (supra), paras 16-19; Govind Rubber (supra), paras 21-22.
120 Vidya Drolia (supra), para 21.
121 Nimet Resources Inc v. Essar Steels Ltd., MANU/SC/0603/2000 : (2000) 7 SCC
497, para 5; Babanrao Rajaram Pund (supra), paras 15 and 29.
122 Jugal Kishore Rameshwardas (supra), para 7; Rickmers Verwaltung Gmbh (supra),
para 12; Shakti Bhog Foods Ltd. (supra), para 17; Caravel Shipping Services (P) Ltd.
(supra), para 8.
123 Rickmers Verwaltung Gmbh (supra), para 13; MTNL v. Canara Bank (supra), para
9.3.
124 Bangalore Electricity Supply Co. Ltd. (BESCOM) v. E.S. Solar Power Pvt. Ltd.
MANU/SC/0337/2021 : 2021:INSC:282 : (2021) 6 SCC 718, paras 16 and 17; Food
Corporation of India v. Abhijit Paul MANU/SC/1511/2022 : 2022:INSC:1216, para 27];
Lewison, The Interpretation of Contracts (6th edn, Sweet and Maxwell 2016) para 2.01,
27.
125 Bank of India v. K. Mohandas MANU/SC/0491/2009 : (2009) 5 SCC 313, para 28.
126 Godhra Electricity Co Ltd. v. State of Gujarat MANU/SC/0282/1974 : (1975) 1 SCC
199, paras 11, 16; McDermott International Inc v. Burn Standard Co Ltd.
MANU/SC/8177/2006 : (2006) 11 SCC 181, para 112.
127 ONGC v. Saw Pipes Ltd. MANU/SC/0314/2003 : (2003) 5 SCC 705, para 13.
128 See Roop Kumar v. Mohan Thedani MANU/SC/0276/2003 : (2003) 6 SCC 595,
paras 13, 16-18.
129 Gary Born, International Commercial Arbitration, vol 1 (3rd edn, Kluwer Law
International 2021) 1531.
130 ibid 1525.
131 ibid 1559.
132 ICC Case No. 4131, 23 September 1982.
133 ibid.
134 Also see Born (supra) 1561; Bernard Hanotiau, 'Chapter 14: Group of Companies in
International Arbitration' in Loukas A. Mistelis and Julian D.M. Lew (ed), Pervasive
Problems in International Arbitration, vol 15 (Kluwer Law International 2006), 286.
135 Born (supra) 1562-1563.
136 Case No. 9-28533, dated 17 February 2011 (Paris Cour d'Appel).
137 Malakoff Corporation Berhad and TLEMCEN Desalination Investment Co. v. Algerian
Energy Co. SA and Hyflux Limited, Case No. 21-07296, dated 13 June 2023 (Paris Cour
d'Appel).
138 Born (supra) 1563.
139 MANU/UKCM/0010/2004 : [2004] EWHC 121 (Comm); Mayor and Commonalty &
Citizens of the City of London v. Ashok Sancheti, MANU/UKWA/0192/2008 : [2008]
EWCA Civ 1283.
140 Bank of Tokyo Ltd. v. Karoon, MANU/UKWA/0080/1984 : [1987] AC 45.
141 MANU/UKSC/0075/2010 : [2010] UKSC 46.
142 Manuchar Steel Hong Kong Ltd. v. Star Pacific Line Pte Ltd. MANU/SGHC/0182/2014
: [2014] SGHC 181.
143 X._et al v. Z._, 4A_115/2003; A._, v. B._ Ltd., 4A_376/2008; X._ v. Y._Engineering
and Y._S.p.A., 4A_450/2013.
144 GE Energy Power Conversion France SAS Corporation, FKA Converteam SAS v.
Outokumpu Stainless USA, LLC, et al., Case No. 18-1048 (1 June 2020).
145 ibid.
146 McBro Planning & Dev. Co. v. Triangle Elec. Constr. Co. Inc., MANU/FEEE/0727/1984
: 741 F.2d 342 (11th Cir. 1984).
147 Nauru Phosphate Royalties, Inc. v. Drago Daic Interests, Inc. MANU/FEFT/0003/1998
: 138 F.3d 160 (5th Cir. 1998).
148 Sarhank Group v. Oracle Corporation MANU/FESC/0345/2005 : 404 F. 3d 657 (2nd
Cir. 2005).
149 Bernard Hanotiau, 'Consent to Arbitration: Do We Share a Common Vision?' (2011)
27(4) Arbitration International 539.
150 Born (supra), 1531.
151 Dow Chemical (supra).
152 Dallah Real Estate (supra) [Paris Cour d'Appel]; Malakoff Corporation (supra).
153 Peterson Farms (supra).
154 Manuchar Steel (supra).
155 X._ et al v. Z._, 4A_115/2003; A._, v. B._Ltd., 4A_376/2008; X._ v. Y._ Engineering
and Y._S.p.A., 4A_450/2013.
156 GE Energy Power Conversion (supra); McBro Planning & Dev. Co (supra); Nauru
Phosphate Royalties, Inc. (supra); Sarhank Group (supra).
157 GE Energy Power Conversion (supra).
158 Sukanya Holdings v. Jayesh H. Pandya MANU/SC/0310/2003 : (2003) 5 SCC 531.
159 Indowind Energy Ltd. v. Wescare (India) Ltd. MANU/SC/0300/2010 : (2010) 5 SCC
306.
160 Chloro Controls (supra), para 71.
161 The amended Section 8(1) of Arbitration and Conciliation Act 1996 reads as under:
"8. Power to refer parties to arbitration where there is an arbitration agreement.- (1) A
judicial authority, before which an action is brought in a matter which is the subject of
an arbitration agreement shall, if a party to the arbitration agreement or any person
claiming through or under him, so applies not later than the date of submitting his first
statement on the substance of the dispute, then, notwithstanding any judgment, decree
or order of the Supreme Court or any Court, refer the parties to arbitration unless it
finds that prima facie no valid arbitration agreement exists."
162 The Respondent sold shares of its subsidiary company to one K.C. Palanisamy, who
undertook to discharge the outstanding liabilities of this company. Clause 14 of this
agreement recognised the right of K.C. Palanisamy to sell or transfer his holdings in the
company to any other person of his choice, provided that transferee accepts the terms
of the agreement regarding the management and financial aspects of the company. This
agreement also contained an arbitration clause. K.C. Palaniswamy nominated the
Appellant to receive 95% of the shares that were to be transferred to him.
Subsequently, disputes arose and an arbitral tribunal directed him to return the share
certificates and title documents. The Appellant was made party to the proceedings filed
by the Respondents to enforce the arbitral award.
163 ibid, para 23.
164 ONGC v. Discovery Enterprises Pvt. Ltd. MANU/SC/0554/2022 : 2022:INSC:483 :
(2022) 8 SCC 42.
165 ibid, para 28.
166 ibid, para 12.
167 Discovery Enterprises (supra).
168 Chloro Controls (supra), paras 72 and 73. This was later followed in Cheran
Properties (supra), para 23.
169 Rishabh Enterprises (supra), para 25.
170 Discovery Enterprises (supra), para 28.
171 Reckitt Benckiser (supra), para 12.
172 MTNL (supra), para 10.5.
173 ibid, para 10.6.
174 ibid,para 10.7.
175 ibid,para 10.16.
176 Discovery Enterprises (supra), para 40.
177 As delineated in para 40 of Discovery Enterprises (supra).

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