Calcutta High Court
Sushil Khaitan vs Ajay Mittal And Ors on 19 March, 2026
Author: Shampa Sarkar
Bench: Shampa Sarkar
IN THE HIGH COURT AT CALCUTTA
ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
COMMERCIAL DIVISION
BEFORE :-
THE HON'BLE JUSTICE SHAMPA SARKAR
AP- COM 755 OF 2025
SUSHIL KHAITAN
VS
AJAY MITTAL AND ORS.
For the Petitioner : Mr. Jishnu Chowdhury, Sr. Adv.
Mr. Deepan Kumar Sarkar, Adv.
Mr. Altamash Alim, Adv.
Mr. Samridha Sen, Adv.
Mr. Jaydeb Ghorai, Adv.
Mr. Saugata Banerjee, Adv.
Mr. Diptesh Ghorai, Adv.
For the Respondent no. 1 : Mr. S. N. Mookherjee, Sr. Adv.
Mr. Subrojyoti Mookherjee, Adv.
Mr. Neelash Choudhury, Adv.
Ms. Anuradha Poddar, Adv.
Judgment Reserved on : 24.02.2026
Judgment Delivered on : 19.03.2026
Judgment Uploaded on : 19.03.2026
Shampa Sarkar, J.
1. This application has been filed for appointment of an arbitrator, to
resolve the disputes which arose between the petitioner and the
2
respondents. The petitioner and the respondent Nos. 1 and 2 are the
partners of Ashoka Exports (in short ‘the firm’). The firm was
registered under the provisions of Indian Partnership Act, 1932. The
firm was engaged, inter alia, in the business of manufacture and
export of jute and cotton bags. The partnership firm was governed by
a Reconstituted Partnership Deed dated April 1, 2009. The said deed
was renewed from time to time. The reconstituted partnership deed
contained an arbitration agreement under clause 25 thereof, which is
quoted below:-
“THAT all matters of differences/dispute relating to the said
partnership affairs shall be referred to arbitration according to
and subject to the prevailing provisions of the Arbitration Act, or
as amended from time to time.”
2. According to Mr. Chowdhury, learned senior Advocate, pursuant to
the final amendment to the reconstituted deed, vide an agreement
dated April 6, 2023, the petitioner and the respondent Nos. 1 and 2
had the following shares in the partnership business:-
“(a) Petitioner : 47.5%
(b) Respondent No.1 : 47.5%
(c) Respondent No. 2 : 5%”
3. Mr. Chowdhury alleged that the respondent No. 1 acted in an unfair,
unjust, disloyal and inequitable manner and denied the right of
petitioner as a partner of the said firm. The respondent No. 1 was
siphoning off the assets of the firm. The respondent No. 3, was
nothing, but the alter ego of the respondent No 1. The respondent no.
1 was also poaching the clients, customers, employees, staff and
workmen of the firm, thereby promoting the business of the
3
respondent No. 3. The respondent No 3 was a company registered
under the Companies Act, 2013 and was running a competitive
business enterprise. It was alleged that the actions of the respondent
No. 1 were contrary to the terms and conditions of the reconstituted
partnership deed. The respondent no. 3 was functioning from the
same premises as the respondent No. 4 and was using the plant,
machinery, space, workmen and the know-how of the partnership
business. Moreover, the petitioner was not being given access to the
accounts and was denied all his rights and privileges as a partner.
4. According to Mr. Chowdhury, the respondent no.1 induced the
petitioner to amicably divide the partnership business and the
petitioner, believing the proposal of the said respondent to be bona
fide and in good faith, agreed to such proposal. Therefore, the
petitioner and the respondent No. 1 executed a Memorandum of
Understanding on October 30, 2024 as to how they would deal with
their business. The respondent No. 2 was jointly and equally owned by
the families of the petitioner and the respondent No. 1. The petitioner
contends to have performed his obligations under the MOU by selling
and causing the sale of his and his family’s shares in the respondent
No. 2, to the respondent No. 1, sometime in December 2024. In
February 2025, the petitioner signed a letter of authority in favour of
the respondent No. 1 in good faith. The respondent No. 1 was
authorized to take loans for the business of respondent no. 3, by
leveraging the financial credibility of the firm. It was alleged that the
respondent no. 1 had unjustly and unfairly appropriated and
4
procured purchase orders of the partnership business, to expand the
business of the respondent no. 3. The respondent no. 3 had also tried
to participate in an international fair, and set up a stall with products
which were akin to those manufactured by the partnership business,
by proclaiming that it was the sole manufacturer of those products.
5. As per the MOU, the division of the business was to be effected from
April 1, 2025. Reciprocal obligations of the petitioner and the
respondent no.1 were contemplated thereunder. The said firm was to
dissolve within a period of 2 years from the date of execution of the
MOU. The respondent no. 1 promised that, he would adhere to the
division of the clients and would not poach any client or employee or
staff of the firm, or take any other step to render the MOU
infructuous. However, there were violations of the terms. The
respondent no. 3 used the same user id of the said firm. Further, the
registered office of the respondent no. 3 was the same as the office of
the respondent no. 4. The business of the firm was usurped by the
respondent no.1. The respondent No. 3 was running a parallel
business. The respondent no.1 severed all relationship with the
petitioner vis-Ã -vis the firm. The petitioner was kept away from all
such business related activities of the firm. It was further alleged that
the respondent no.1 continued to act unjustly and unfairly against the
interest of the firm.
6. Thus, disputes cropped up between the parties, and the petitioner
filed an application under Section 9 of the Arbitration and Conciliation
Act, 1996 for various interim reliefs. The application under Section 9
5
came up for hearing before the High Court. The following order was
passed:-
“……
7. Although the law provides that any difference arising as to ordinary
matters connected with the business may be decided by a majority of
the partners, and every partner shall have the right to express his
opinion before the matter is decided, there is nothing on record to
show that any attempt was made by the partners to resolve the
disputes in terms of Section 12(c). Every partner has a right to have
access to and inspect the books of the firm. Thus, Sushil cannot be
kept away from the accounts, papers and books of accounts of the
firm and he shall have access to the same.
8. General duties of the partners under Section 9 of the said Act
provides that partners are bound to carry on business of the firm to
the greatest common advantage, to be just and faithful to each other,
and to render true accounts and full information of all things affecting
the firm, to any partner or his legal representative.
……
11. Under such circumstances, the petitioner being a partner of the
firm shall enjoy the benefits of the business as per law, shall have
equal right of participation in the business, shall be allowed to visit
the office and access the books of accounts etc. … All rights
emanating from the Indian Partnership Act, 1932, shall be made
available to Sushil…
12. Status quo will be maintained with regard to the assets. The
assets which have allegedly been sold to Green Bridge, will not be
further alienated. The nature and character of the same shall not be
changed…”
7. Alleging non-compliance and violation of the above order, a contempt
application was filed vide C.P. Com No. 13 of 2025. The following order was
passed:-
“Copy of the contempt application be served upon the learned
Advocate on record for the alleged contemnor. Affidavit in opposition
to be filed within two weeks from date; reply, if any, within a week
thereafter.
Let this matter appear along with AP-COM/ 427/2025 on September
15, 2025.
In the meantime, the interim order already passed, which Mr.
Mookherjee submits to have been complied with, shall continue. Both
the parties shall act in terms of the partnership agreement in respect
of the partnership firm operating under the name and style of ‘Ashoka
Exports’. Both the parties shall have access to the official e-mails
6received from the customers or any other third party of the
partnership firm ‘Ashoka Exports’.
Needless to mention that all parties shall have access to the accounts
of ‘Ashoka Exports’ as well.
The submission of Mr. Chowdhury, learned Senior Advocate that,
Green Bridge Exports Private Limited has been using the premises
and the assets of Ashoka Exports, shall be decided on the next date.”
8. The petitioner issued a notice under Section 21 of the Arbitration and
Conciliation Act, invoking clause 25 of the reconstituted Partnership Deed,
and nominated a retired Chief Justice to act as the sole arbitrator for
adjudication of the claims of the petitioner. Mr. Jishnu Chowdhury
submitted that this was a fit case for appointment of an arbitrator, in view
of the disputes between the parties. The corporate veil of the respondent
No.3 should be pierced, to appreciate the role and involvement of the
respondent No.3 in the dispute which had arisen.
9. Mr. Jishnu Chowdhury relied on the following decisions:-
(i) Cox and Kings Limited vs Sap India Private Limited and Anr.
reported in (2024) 4 SCC 1
(ii) Oil and Natural Gas Corporation Limtied vs Discovery
Enterprises private Limited and Anr. reported in (2022) 8 SCC 42
(iii) Cox and Kings Limited vs Sap India Private Limited and Anr.
reported in (2025) 1 SCC 611,
(iv) ASF Buildtech Private Limited vd Shapoorji Pallonji and
Company Private Limited reported in (2025) 9 SCC 76.
10. The respondent no.1 replied to the notice invoking arbitration and
refused to agree to the name proposed by the petitioner and recommended
another learned senior Advocate, to act as the Arbitrator.
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11. Hence, this application has been filed for appointment of an arbitrator
in terms of clause 25 of the reconstituted partnership deed, inter alia, for
the resolution of the dispute between the parties. The other respondents
did not enter appearance despite service. The respondent No.1 filed an
affidavit-in-opposition to the application and denied the allegations of the
petitioner. Mr. S.N. Mookherjee, learned senior Advocate for the Respondent
no. 1 submitted that, the petitioner was actually trying to implement the
terms and conditions of the MOU, which did not contain any arbitration
clause. The respondent no. 3 was not a partner of the respondent no.4 and
was in no way connected with the Reconstituted Partnership Deed dated
April 1, 2009. There was no arbitration agreement between the petitioner
and the respondent no.3. The respondent no.3 could not be compelled to
participate in the arbitral proceeding. The respondent no.3 was a company
incorporated under the Companies Act. It had a separate legal identity from
the respondent no.1. When the deed was executed between the parties, that
is, on April 1, 2009, the respondent no.3 was not in existence.
12. It was also urged that, no materials had been disclosed before the
court which would demonstrate that as on April 1, 2009, either the
respondent No.1 or the respondent no.3 had shown any intention to bind
the respondent No.3 either to the partnership business or the arbitration
clause. Further, the averments in the application and the documents
annexed thereto, disclosed a separate and independent legal existence of
the respondent no. 3. The identity of the respondent No. 3 was neither
doubtful nor questionable. The arbitration agreement was contained
exclusively in the partnership deed. The covenants in the said deed, did not
8
disclose any obligation of the respondent no.3. The respondent no. 3 was
not connected with the underlying contract. There was nothing on record
which would show that the respondent no.3, either directly or indirectly,
could be bound by the arbitration agreement. Moreover, the respondent
no.3 was not a party to the injunction application, but had been craftily
added as a respondent in this application. This attempt of the petitioner to
drag the respondent no.3 to an arbitral proceeding, was nothing but a ploy
to harass and the respondent no.3 and hinder its business.
13. Mr. Mookherjee learned senior Advocate further submitted that the
decisions relied upon by Mr. Jishnu Chowdhury were under the group
companies doctrine. In those decisions, the central issue was whether a
company who was not a signatory to an arbitration agreement should be
referred to arbitration, being a part or constituent of the same group. In all
such decisions, it had been recognized that the group companies’ doctrine
was a consent-based doctrine for identifying the real intention of the parties
to bind the non-signatory corporate entities to an arbitration agreement.
Mr. Mookherjee referred to paragraphs 85 to 94 of the decisions reported in
Cox and Kings Limited vs. Sap India Private Limited and Another
reported in (2024) 4 SCC 1 in support of his contentions.
14. It was urged that, in the case in hand, the respondent no.3 had not
expressed any consent to be bound either by the Reconstituted Partnership
Deed dated April 1, 2009 or by the arbitration clause contained therein. As
such, none of the decisions would be applicable. There was nothing on
record which would indicate that the respondent no.1 was the agent of the
respondent no.3 or that the respondent no.3 had stepped into the shoes of
9
the respondent No. 1. It was further submitted that, the doctrine of piercing
the corporate veil could not be easily invoked and ought to be used
sparingly, specially in the context of reference to arbitration. The only
reason cited by the petitioner to invoke arbitration against the respondent
no.3 was that the respondent no.1 was in control and management of the
respondent no.3. Referring to Balwant Rai Saluja vs Air India Ltd.
reported in (2014) 9 SCC 407, it was categorically submitted that the
Hon’ble Apex Court had held that separateness of the corporate personality
could not be disregarded, solely on the ground of ownership and control.
The petitioner had failed to make out and establish a case for piercing the
corporate veil. Mere averment that the respondent no.3 was the alter ego of
the respondent no.1 and that the respondent no.1 was competing with the
partnership business through the respondent no. 3, would not be sufficient
ground to pierce the corporate veil of the respondent no.3. The fact that
some assets of the partnership had been transferred to the respondent no.3
for valuable consideration, also, could not result in the respondent no.3
being bound by the covenants of the partnership deed and by the
arbitration agreement. Thus, in this case, the doctrine of piercing the
corporate veil could not be pressed into service. Distinguishing the decision
reported in Oil and Natural Gas Corporation (supra), Mr. Mookherjee
submitted that, before a non-signatory could be referred to arbitration,
several factors like intention of the parties, relationship between the
signatory and the non-signatory, commonality of the subject matter,
composite nature of the transaction and performance of the contract, were
to be considered by the referral court.
10
15. Mr. Mookherjee vehemently urged that the respondent no.3 was
unconnected with the affairs of the respondent no.4 and played no role
whatsoever in the internal affairs of the respondent no.4. The reconstituted
partnership deed contained personal covenants which were relevant only to
the partners of the respondent no.4.
16. Moreover, the Hon’ble Apex Court had specifically held in the decision
of Cox and Kings (supra) that the referral court should, prima facie, come
to a finding that the non-signatory was a veritable party before referring
such non-signatory to arbitration.
17. Considered the rival contentions of the parties. The petitioner and the
respondent nos.1 and 2 are partners of a firm registered under the Indian
Partnership Act, The partnership is governed by the Reconstituted
Partnership Deed dated April 1, 2009. Clause 19 provides that each partner
shall be just and faithful to each other in all transactions relating to the
partnership and shall at all times be responsible to give the other a just and
faithful account of the partnership business. Clause 21 provides that no
partner shall, without the consent in writing of the other partner, start a
similar or identical type of business like that of the firm. Clause 25 provides
that all matters of dispute relating to the affairs of the partnership, shall be
referred to arbitration, according to and subject to the prevailing provisions
of the Arbitration and Conciliation Act, as amended from time to time. The
partnership deed underwent various amendments and lastly on April 6,
2023, the profit and loss sharing was amended as follows:
Ajay Mittal – 47.5%
Sushil Khaitan- 47.5%
M/s Preview Barter Private Limited – 5%.
11
18. A Memorandum of Understanding (MOU) was entered into between
the petitioner and the Respondent no. 1 on October 30, 2024. The said
Memorandum of Understanding provided as follows:-
“WHEREAS THE PARTIES hereto of the FIRST AND SECOND PARTS
have been doing, partner of M/s ASHOKA EXPORTS since …….
Sharing profit and Loss equally. In the course of business, the
following companies have also been established for effectively running
the Joint Business.
1. Ashoka Jute Products Pvt. Ltd.
2. Preview Barter Pvt. Ltd.
3. Cegaro Industries Pvt. Ltd.
WHEREAS heirs apparent of both the Parties have joined the business
and keeping future prospects in mind and to avoid any
misunderstanding/dispute it has been amicably decided by both the
Parties to split the existing business of manufacturing and Export of
Jute, Cotton, Juco bags as per the agreed terms and conditions as
enumerated hereunder:
1. That the division will be effective from 1st April 2025. However,
orders received up to 28th February or deliverable by March 2025 as
per WO, will remain in joint account.
2. That M/s Ashoka Exports, (AE), the partnership firm will remain a
partnership firm with Parties hereto of the First and second Parts as
equal partners. M/s Preview Barter Pt Ltd, (PBL) which is a 5%
partner will retire and all the investment of PBL will be returned back.
M/s AE will remain in existence till both parties mutually decide to
wind up AE. It is, however, agreed that the winding up process of AE
should start within a maximum of 2 years.
3. That existing domestic and Export clients of AE will be divided
between both Parties as per the attached list, except M/s Promogift
and Promoline of Italy (including any new entity that they max create)
(Promo), which will remain in the joint partnership firm AE.
4. The business of Promo will be divided equally between both the
parties as per Value and Profit and will be executed by the parties
independently. The export would be done through AE at nominal
profit. Both parties have agreed to devise modalities within 2 years
(31.03.2027) so as the business of Promo is also divided equally
between them.”
19. Both parties, keeping the future in mind had amicably decided to split
the existing business of manufacture and export of jute, cotton, jute bags
as per the agreed terms and conditions. The MOU provided that Ashoka
Exports, that is the respondent no. 4, would remain a partnership firm. The
12
petitioner and the respondent no. 1 would be equal partners. M/s Preview
Barter Private (PBL) Limited which was a 5% partner, would retire and all
the investments of PBL would be returned back. The respondent no. 4
would remain in existence till both the parties mutually decided to wind up
the respondent no. 4. and the winding up process would start within a
maximum of 2 years. Therefore, the existing domestic and export clients of
the respondent no. 4 would be divided between both the parties as per the
list attached to the MOU, except M/s Promogift and M/s Promoline of Italy,
which would remain in the joint partnership of Ashoka Exports. The
business of Promo would be divided equally between the parties as per
value and profit and would be executed by the parties independently. The
exports would be done through the respondent no. 4 at nominal profit.
20. It, prima facie, appears to this court from the said MOU that, Ashoka
Exports, the respondent no. 4, continued to be a partnership firm and both
the parties were entitled to their rights and share in profits etc., which
emanated from the Reconstituted Partnership Deed. Under the said deed,
the respondent no.1 had to comply with the covenants and obligations
mentioned therein. One of the covenants being that the petitioner would
enjoy the status of a partner having equal right to the profits and equal
right in participation of the business. The respondent no.1 could not keep
the petitioner away from the business. The allegation of the petitioner was
that the respondent no. 1 had ousted the petitioner completely from the
firm. Further allegation was that, although, the respondent no. 3 was
incorporated under the Companies Act, it was nothing but the alter ego of
the petitioner no.1 and the business of the respondent no. 3 was the same
13
as that of the said partnership firm. The expertise, clients, workers, etc. of
the firm were all being used by the respondent no. 3. Under such
circumstances, a, prima facie, case for piercing the corporate veil of the
respondent no. 3, in order to detect the connection of the respondent no. 3
with the dispute involved has been made out. Impleadment of the
respondent no. 3 in this proceeding, prima facie, appears to be justified.
Moreover, there are documents which would indicate that the respondent
no. 1 had himself acknowledged that, in view of the disputes between the
parties, the respondent no.1 had decided to go on his own and continue
with a similar business, through the respondent no. 3 from the same
premises as the firm. There are allegations that the same user Id as that of
the firm was being used by the respondent No. 3. The workers were being
poached and the purchase orders were diverted to the respondent no. 3.
21. Under such circumstances, based on the allegations made by the
petitioner, it is, prima facie, established that there may be a commonality in
the subject matter of the dispute between the petitioner and the respondent
nos. 1 and 3. The allegations against the respondent no. 3 are specific. The
petitioner’s clear case is that the respondent no. 3 was running a
competitive business as that of the respondent no. 4, during the
subsistence of the firm, by not only poaching the customers and obtaining
the purchase orders, but also by taking away the men and machinery of the
partnership business. The respondent no. 3 was functioning from the same
premises as that of the respondent no. 4 and also using the same user id.
The referral Court cannot delve deeper into the issues and hold a mini-trial,
but refer the dispute to arbitration, leaving it open to the learned Arbitrator
14
to decide on the issue of mis-joinder of the respondent No. 3. The learned
arbitrator has the jurisdiction to decide who can be impleaded and who
cannot. The arbitrator can also add a party or delete a party. The learned
arbitrator can impose cost if he finds that a non-signatory has been
unnecessarily dragged into the proceeding. Any firm opinion of the referral
court on the issue of mis-joinder runs the risk of frustrating the arbitration
agreement, thereby, causing serious prejudice to the claimant. The
allegations also revolve around the mode and manner in which the
respondent No.3 had derived benefits from the business of the firm,
thereby, being bound by the doctrine of estoppel.
22. In Cox and Kings (supra), it has been held that, even an alter ego can
be referred to arbitration under exceptional situations:-
“86. Courts and tribunals across the world have been applying
traditional contractual and commercial doctrines to determine the
consent of the non-signatory parties to be bound by the arbitration
agreement. Generally, consent-based theories such as agency,
novation, assignment, operation of law, merger and succession, and
third-party beneficiaries have been applied in different jurisdictions.
In exceptional circumstances, non-consensual theories such as
piercing the corporate veil or alter ego and estoppel have also been
applied to bind a non-signatory party to an arbitration agreement. The
Group of Companies doctrine is one such consent-based doctrine
which has been applied, albeit controversially, for identifying the real
intention of the parties to bind a non-signatory to an arbitration
agreement.”
23. In ONGC Limited (supra), it was held that a non-signatory may be
held to be bound on a non-consensual basis, by applying the principle of
estoppel and alter ego. Thus, a non-signatory to an arbitration agreement,
15
even against its wish, can be referred to arbitration. Paragraphs 37-41 are
quoted below:-
“37. Gary B. Born in his treatise on International Commercial
Arbitration indicates that:
“The principal legal basis for holding that a non-signatory is
bound (and benefited) by an arbitration agreement … include
both purely consensual theories (e.g., agency, assumption,
assignment) and non-consensual theories (e.g. estoppel, alter
ego) [ Gary Born, International Commercial Arbitration, 2nd Edn.,
Vol. 1, at p. 1418.] .”
38. Explaining the application of the alter ego principle in
arbitration, Born also notes:
“Authorities from virtually all jurisdictions hold that a party who
has not assented to a contract containing an arbitration clause
may nonetheless be bound by the clause if that party is an ‘alter
ego’ of an entity that did execute, or was otherwise a party to,
the agreement. This is a significant, but exceptional, departure
from the fundamental principle … that each company in a
group of companies (a relatively modern concept) is a separate
legal entity possessed of separate rights and liabilities [Id, p.
1432] .
***
“the group of companies doctrine is akin to principles of agency
or implied consent, whereby the corporate affiliations among
distinct legal entities provide the foundation for concluding that
they were intended to be parties to an agreement,
notwithstanding their formal status as non-signatories [Id, p.
1450] .”
39. Recently, John Fellas elaborated on the principle of binding a
non-signatory to an arbitration agreement from the lens of the
doctrine of estoppel. He situated the rationale behind the
application of the principle of direct estoppel against competing
considerations of party autonomy and consent in interpreting
arbitration agreements. Fellas observed that non-signatory parties
can be bound by the principle of direct estoppel to prohibit such a
party from deriving the benefits of a contract while disavowing the
obligations to arbitrate under the same:
“There are at least two distinct types of estoppel doctrine that
apply in the non-signatory context:”the direct benefits” estoppel
theory and the “intertwined” estoppel theory. The direct benefits
theory bears the hallmark of any estoppel doctrine-prohibiting a
party from taking inconsistent positions or seeking to “have it
both ways” by “rely[ing] on the contract when it works to its
advantage and ignor[ing] it when it works to its
disadvantage.” Tepper Realty Co. v. Mosaic Tile Co. [Tepper
Realty Co. v. Mosaic Tile Co., 259 F Supp 688 (SDNY 1966)]
16. The direct benefits doctrine reflects that core principle by
preventing a party from claiming rights under a contract but, at
the same time, disavowing the obligation to arbitrate in the same
contract.
***
By contrast, the intertwined estoppel theory looks not to
whether any benefit was received by the non-signatory, but
rather at the nature of the dispute between the signatory and
the non-signatory, and, in particular whether “the issues the
non-signatory is seeking to resolve in arbitration are intertwined
with the agreement that the estoppel [signatory party] has
signed….the intertwined estoppel theory has as its central aim
the perseveration of the efficacy of the arbitration process is
clear when one looks at the typical fact pattern of an
intertwined estoppel case.” [ John Fellas, “Compelling
Signatories to Arbitrate with Non-Signatories”, New York Law
Journal (28-3-2022)]
(emphasis supplied)
***
***
41. Consent and party autonomy are undergirded in Section 7 of
the 1996 Act. However, a non-signatory may be held to be bound
on a consensual theory, founded on agency and assignment or on a
non-consensual basis such as estoppel or alter ego [ Gary
Born, International Commercial Arbitration, 2nd Edn., Vol. 1, at p.
1418.] . These principles would have to be understood in the
context of the present case, where ONGC’s attempt at the joinder of
JDIL to the proceedings was rejected without adjudication of
ONGC’s application for discovery and inspection of documents to
prove the necessity for such a joinder.”
24. In the decision of ASF Buildtech (supra),the Hon’ble Apex Court held
as follows:-
“110. Even if it is assumed for a moment that the Referral Court
in its jurisdiction under Section 11 of the 1996 Act has the
discretion to determine whether a non-signatory is a veritable
party to the arbitration agreement or not, by virtue of Cox &
Kings (1) [Cox & Kings Ltd. v. SAP (India) (P) Ltd., (2024) 4 SCC
1 : (2024) 2 SCC (Civ) 1 : (2024) 251 Comp Cas 680] , the
Referral Court should only refrain but rather loathe the exercise
of such discretion. Any discretion which is conferred upon any
authority, be it Referral Courts must be exercised reasonably
and in a fair manner. Fairness in this context does not just
17extend to a non-signatory’s rights and its apprehension of
prejudice, fairness also demands that the arbitration
proceedings is given due time to gestate so that the entire
dispute is holistically decided. Any determination even if prima
facie by a Referral Court on such aspects would entail an
inherent risk of frustrating the very purpose of resolution of
dispute, if the Referral Courts opine that a non-signatory in
question is not a veritable party. On the other hand, the
apprehensions of prejudice can be properly mitigated by leaving
such question for the Arbitral Tribunal to decide, as such party
can always take recourse to Section 16 of the 1996 Act and
thereafter in appeal under Section 37, and where it is found
that such party was put through the rigmarole of arbitration
proceedings vexatiously, both the Tribunal and the courts, as
the case may be, should not only require that all costs of
arbitration insofar as such non-signatory is concerned be borne
by the party who vexatiously impleaded it, but the Arbitral
Tribunal would be well within its powers to also impose costs.
This extract is taken from ASF Buildtech (P) Ltd. v. Shapoorji
Pallonji & Co. (P) Ltd., (2025) 9 SCC 76 : 2025 SCC OnLine SC
1016 at page 191III. Decision of Cox & Kings (2) [Cox & Kings Ltd. v. SAP (India)
(P) Ltd., (2025) 1 SCC 611 : (2025) 1 SCC (Civ) 314 : (2024) 251
Comp Cas 802] andAjay Madhusudan [Ajay Madhusudan Patel
v. Jyotrindra S. Patel, (2025) 2 SCC 147 : (2025) 1 SCC (Civ)
154] and the scope of Section 11 of the 1996 Act for joinder of
non-signatories to arbitration proceedings
111. The aforesaid may be looked at from one another angle.
This Court in Cox & Kings (1) [Cox & Kings Ltd. v. SAP (India)
(P) Ltd., (2024) 4 SCC 1 : (2024) 2 SCC (Civ) 1 : (2024) 251
Comp Cas 680] also discussed the role and scope of jurisdiction
of the Referral Courts and Arbitral Tribunals under Section(s)
11 and 16 of the 1996 Act, particularly in the context of binding
a non-signatory to the arbitration agreement. It reiterated that
under Section 11, the Referral Court only has to determine the
prima facie existence of an arbitration agreement. Whereas, the
issue of determining parties to an arbitration agreement is quite
distinct from “existence” of the arbitration agreement, as such
issue goes to the very root of the jurisdictional competence of
the Arbitral Tribunal, and thus, empowered to decide the same
under Section 16. Placing reliance on the decision of this Court
in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. [Shin-
Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234
: (2005) 127 Comp Cas 97] ,
18
112. However, with the advent of Cox and Kings (I) (supra), the
legal foundation for the application of the ‘Group of Companies’
doctrine, or any analogous principles designed to determine
mutual consent was clarified to exist in the definition of “party”
under Section 2(1)(h) read with the meaning of “arbitration
agreement” under Section 7 of the Act, 1996. Unlike Section(s) 8
and 45 of the Act, 1996, the provisions of Section(s) 2(1)(h) and
7 are not confined in their applicability to only judicial forums
or courts, and rather extend equally to both courts and arbitral
tribunals, as these provisions form the bedrock of the
framework of arbitration under the Act, 1996. The logical
sequitur of this is that arbitral tribunals, too, are vested with
the requisite authority to engage with and apply principles,
such as the ‘Group of Companies’ doctrine, when determining
whether a non-signatory may be bound by an arbitration
agreement.
113. It is well within the jurisdiction of the Arbitral Tribunal to
decide the issue of joinder and non-joinder of parties and to
assess the applicability of the Group of Companies Doctrine.
Neither in Cox and Kings (I) (supra) nor in Ajay
Madhusudhan (supra), this Court has said that it is only the
reference courts that are empowered to determine whether a
non-signatory should be referred to arbitration. The law which
has developed over a period of time is that both ‘courts and
tribunals’ are fully empowered to decide the issues of
impleadment of a non-signatory and Arbitral Tribunals have
been held to be preferred forum for the adjudication of the
same.
114. In the case of Ajay Madhusudhan (supra), this Court,
placing reliance on Cox and Kings (I) (supra), has expressly
held that Section 16 is an inclusive provision which
comprehends all preliminary issues touching upon the
jurisdiction of the arbitral tribunal and the issue of
determining parties to an arbitration agreement goes to the
very root of the jurisdictional competence of the arbitral
tribunal.
115. The case of Ajay Madhusudhan (supra) also recognizes
that the legal relationship between the signatory and non-
signatory assumes significance in determining whether the non-
signatory can be taken to be bound by the Arbitration
Agreement. This Court also issued a caveat that the ‘courts and
tribunals should not adopt a conservative approach to exclude
all persons or entities who are otherwise bound by the
underlying contract containing the arbitration agreement
through their conduct and their relationship with the signatory
parties. The mutual intent of the parties, relationship of a non-
signatory with a signatory, commonality of the subject matter,
the composite nature of the transactions and performance of the
19
contract are all factors that signify the intention of the non-
signatory to be bound by the arbitration agreement’.”
116. Recently, a coordinate bench of this Court in Adavya
Projects Pvt. Ltd. v. Vishal Strcturals Pvt. Ltd., 2025 INSC
507, also held that an arbitral tribunal under Section 16 of
the Act, 1996 has the power to implead the parties to an
arbitration agreement, irrespective of whether they are
signatories or non-signatories, to the arbitration
proceedings. This Court speaking through. P.S. Narasimha
J. observed that since an arbitral tribunal’s jurisdiction is
derived from the consent of the parties to refer their
disputes to arbitration, any person or entity who is found to
be a party to the arbitration agreement can be made a part
of the arbitral proceedings, and the tribunal can exercise
jurisdiction over him. Section 16 of the Act, 1996 which
empowers the arbitral tribunal to determine its own
jurisdiction, is an inclusive provision that covers all
jurisdiction question including the determination of who is a
party to the arbitration agreement, and thus, such a
question would be one which falls within the domain of the
arbitral tribunal. It further observed that, although most
national legislations do not expressly provide for joinder of
parties by the arbitral tribunal, yet an arbitral tribunal can
direct the joinder of a person or entity, even if no such
provision exists in the statute, as long as such person or
entity is a party to the arbitration agreement. Accordingly,
this Court held that since the respondents therein were
parties to the underlying contract and the arbitration
agreement, the arbitral tribunal would have the power to
implead them as parties to the arbitration proceedings in
exercise of its jurisdiction under Section 16 of the Act, 1996.
The relevant observations read as under: –
“24. As briefly stated above, the determination of
who is a party to the arbitration agreement falls
within the domain of the arbitral tribunal as per
Section 16 of the ACA. Section 16 embodies the
doctrine of kompetenz-kompetenz, i.e., that the
arbitral tribunal can determine its own
jurisdiction. The provision is inclusive and covers
all jurisdictional questions, including the existence
and validity of the arbitration agreement, who is a
party to the arbitration agreement. and the scope
of disputes referrable to arbitration under the
agreement. Considering that the arbitral tribunal’s
power to make an award that binds the parties is
derived from the arbitration agreement, these
jurisdictional issues must necessarily be decided
through an interpretation of the arbitration
20agreement itself. Therefore, the arbitral tribunal’s
jurisdiction must be determined against the
touchstone of the arbitration agreement.
***
118. Furthermore, the legislative intent underlying
Section 11 of the 1996 Act–particularly sub-
section (6-A)–is to ensure the expeditious disposal
of applications for the appointment of arbitrators.
This legislative objective militates against Referral
Courts undertaking any elaborate or detailed
factual inquiry, which would inevitably delay
proceedings. Prudence thus dictates that the
Referral Courts confine themselves to a prima facie
examination of the existence of the arbitration
agreement and leave substantive determinations,
such as the binding nature of non-signatories, to
the Arbitral Tribunal. An additional and equally
compelling consideration is that the power
exercised by the Referral Courts under Section 11
of the 1996 Act is judicial in nature. Consequently,
the Referral Courts must refrain from embarking
upon an intricate evidentiary inquiry or making
final determinations on matters that are within the
jurisdiction of the Arbitral Tribunal. Any
premature adjudication or opinion by the Referral
Court would not only usurp the Tribunal’s role as
the forum of first instance for dispute resolution
but could also cause irremediable prejudice. In
particular, if the Referral Court were to refuse
impleadment of a non-signatory, there would be no
statutory right of appeal available to challenge
such a refusal. In contrast, determinations made
by the Arbitral Tribunal–including on issues of
jurisdiction and impleadment–are amenable to
challenge under Section 16 of the 1996 Act and,
thereafter, under Section 37. Accordingly, the
better course of action is for the Referral Courts to
refrain altogether from delving into the issue of
whether a non-signatory is a veritable party to the
arbitration agreement, and to leave such matters
for the Arbitral Tribunal to decide in the first
instance.”
21
25. Under such circumstances, the application is allowed. All objections
raised by Mr. Mookherjee can be raised before the learned Arbitrator. The
observations made hereinabove are prima facie.
26. Mr. Jishnu Saha, learned senior Advocate is appointed as the learned
Arbitrator to arbitrate upon the disputes between the parties.
27. The learned Arbitrator shall comply with the provisions of Section 12
of the Arbitration and Conciliation Act, 1996. The learned Arbitrator shall
be at liberty to fix his remuneration as per the Schedule of Arbitration and
Conciliation Act, 1996.
(Shampa Sarkar, J.)
