In a significant ruling delivered on May 2, 2025, the Supreme Court of India in ASF Buildtech Private Limited V. Shapoorji Pallonji And Company Private Limited has decisively affirmed and expanded the power of arbitral tribunals to implead non-signatories to arbitration proceedings. This judgement authored by Justice J.B. Pardiwala and Justice R. Mahadevan represents a paradigm shift in Indian arbitration law, resolving a contentious issue that had previously resulted in contradictory positions across various High Courts.
Background and Factual Matrix
The dispute originated from a contractual relationship involving multiple entities of the ASF Group. Black Canyon SEZ Pvt. Ltd. (BCSPL) had initiated arbitration against Shapoorji Pallonji & Co. Pvt. Ltd. (SPCPL) concerning a Settlement Agreement dated July 24, 2020. SPCPL filed a counterclaim not only against BCSPL but also against ASF Buildtech Pvt. Ltd. (ABPL) and ASF Insignia SEZ Pvt. Ltd. (AISPL), contending that all these entities constituted the ‘ASF Group’ and were bound by the arbitration agreement contained in the Works Contract dated November 21, 2016, under the Group of Companies doctrine.
ABPL, the appellant, challenged its impleadment on three primary grounds: (1) it was neither a signatory to the arbitration agreement nor actively involved in the negotiation, performance, or termination of the relevant contracts; (2) it was never made a party to the proceedings before the referral court under Section 11 of the Arbitration and Conciliation Act, 1996; and (3) no notice of invocation was issued to it as mandated under Section 21 of the Act. ABPL argued that being merely a holding company of BCSPL and AISPL was insufficient to warrant its impleadment in the arbitration.
The Delhi High Court upheld the arbitral tribunal’s decision to implead ABPL, finding that the ASF Group functioned as a cohesive entity where the three companies were not operationally distinct, leading to this appeal before the Supreme Court.
Divergent High Court Positions Before the Judgement
The Supreme Court meticulously analysed contradictory High Court positions on whether arbitral tribunals possess the power to implead non-signatories. One line of cases, including decisions from the Bombay High Court (Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Ltd., 2015), Delhi High Court (Balmer Lawrie & Co. Ltd. v. Saraswathi Chemicals, 2017; Sudhir Gopi v. Indira Gandhi National Open University, 2017), and Madras High Court (V.G. Santhosam v. Shanthi Gnanasekaran, 2020), had held that arbitral tribunals lacked jurisdiction to lift the corporate veil or implead non-signatories.
The contrary view, expressed in decisions such as the Gujarat High Court’s IVRCL Ltd v. Gujarat State Petroleum Corporation Ltd (2015) and IMC Ltd v. Board of Trustees of Denndayal Port Trust (2018), recognised the arbitral tribunal’s power to implead non-signatories through principles like alter ego and the Group of Companies doctrine.
The Evolution of Non-Signatory Joinder in Indian Arbitration Law
Justice Pardiwala’s judgement traced how the law evolved on the joinder of non-signatories to arbitration. The landmark case of Chloro Controls v. Severn Trent Water Purification (2013) first recognised that even non-signatories could be bound by arbitration agreements in exceptional cases. However, two key misconceptions emerged from this judgement:
- First Misconception: The erroneous understanding that the legal basis for applying doctrines like ‘Group of Companies’ was rooted exclusively in Sections 8 and 45 of the Act (which empowered courts to refer parties to arbitration) and not in the more general provisions defining “party” and “arbitration agreement” under Sections 2(1)(h) and 7.
- Second Misconception: The misconception that referral courts must make a final determination of all issues fundamental to making a reference to arbitration, including whether a non-signatory could be bound by the arbitration agreement, based on the seven-judge bench decision in SBP & Co. v. Patel Engineering (2005).
The Rectification of Legal Misconceptions
The Court explained how these misconceptions were rectified through subsequent judicial developments:
- The five-judge bench decision in Cox and Kings (I) v. SAP India (2023) clarified that the legal basis for applying the ‘Group of Companies’ doctrine lies in the definition of “party” under Section 2(1)(h) read with Section 7 of the Act, not in the expression “claiming through or under” in Sections 8 and 45. Since these provisions apply equally to courts and arbitral tribunals, arbitral tribunals are equally empowered to apply these principles.
- The decisions in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899 (2023) and SBI General Insurance Co. Ltd. v. Krish Spinning (2024) narrowed the scope of judicial scrutiny at the referral stage under Section 11 to a prima facie determination of the “existence” of the arbitration agreement, leaving all other questions, including those related to jurisdiction, to the arbitral tribunal.
Key Findings of the Supreme Court
The Supreme Court’s comprehensive analysis led to several groundbreaking conclusions:
- Authority of Arbitral Tribunals: There is no inhibition in the scheme of the Arbitration Act that precludes an arbitral tribunal from impleading a non-signatory on its own accord, provided such non-signatory is bound by the arbitration agreement based on principles like the ‘Group of Companies’ doctrine.
- Nature of Determination: The determination of whether a non-signatory is bound by an arbitration agreement is fundamentally a fact-intensive exercise requiring a nuanced determination of consent from diverse factual elements and circumstances, making the arbitral tribunal the most appropriate forum for such determination.
- Distinction Between “Existence” and “Intention”: The Court distinguished between determining the “existence” of an arbitration agreement (the limited inquiry required at the referral stage) and determining the intention of parties from the “express words” of the agreement (a more extensive inquiry better suited for arbitral tribunals).
- Doctrine of Kompetenz-Kompetenz: Section 16 of the Act, which embodies the principle of kompetenz-kompetenz, empowers arbitral tribunals to rule on their own jurisdiction, including determining who the parties to the arbitration agreement are.
- Purpose of Section 21 Notice: The notice under Section 21 serves only a procedural function of establishing when arbitration is deemed to have commenced for limitation purposes. Non-service of such notice does not nullify the arbitral tribunal’s jurisdiction over a non-signatory that is otherwise bound by the arbitration agreement.
- Source of Arbitral Jurisdiction: An arbitral tribunal’s jurisdiction derives from the arbitration agreement itself, not from the act of appointment or the procedural formalities of its constitution.
Doctrine of Implied Powers
The judgement innovatively applied the doctrine of implied powers to the Arbitration Act, building on the recent five-judge bench decision in Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd (2025). The Court reasoned that even in the absence of an express provision empowering arbitral tribunals to implead non-signatories, such power must be recognised as a necessary intendment of the express provisions of Sections 2(1)(h) and 7 and the overall scheme and object of the Act.
Call for Legislative Action
Notably, the Court expressed disappointment that even the proposed Arbitration and Conciliation Bill, 2024, fails to address the issue of impleadment or joinder by arbitral tribunals explicitly, despite numerous judicial decisions highlighting this need. The Court urged the Department of Legal Affairs to reconsider this omission while the bill is still under consideration.
Practical Implications and Global Alignment
This judgement has profound implications for arbitration practice in India:
- Comprehensive Dispute Resolution: It allows for more efficient dispute resolution by enabling arbitral tribunals to bring all relevant parties into the proceedings, avoiding multiplicity of proceedings.
- Alignment with Commercial Reality: It acknowledges the complexity of modern business transactions involving multiple related entities and ensures that arbitration remains a viable and effective dispute resolution mechanism.
- Global Harmonisation: It brings Indian arbitration law in line with international best practices, enhancing India’s position as an arbitration-friendly jurisdiction.
- Minimal Judicial Intervention: It reinforces the principle that courts should exercise restraint in interfering with arbitration proceedings, particularly at the pre-arbitral stage.
- Procedural Certainty: It clarifies long-standing procedural ambiguities regarding the impleadment of non-signatories, providing much-needed certainty to practitioners and parties to arbitration.
The judgement in ASF Buildtech v. Shapoorji Pallonji represents a monumental advancement in Indian arbitration jurisprudence. By definitively establishing the power of arbitral tribunals to implead non-signatories bound by the arbitration agreement, the Supreme Court has not only resolved a significant area of uncertainty but also strengthened the institutional framework of arbitration in India.
This progressive interpretation balances party autonomy with procedural efficiency and marks a decisive step toward making arbitration a truly comprehensive and effective dispute resolution mechanism. The judgement’s nuanced analysis of the interplay between arbitral authority, procedural requirements, and substantive jurisdiction provides a robust framework that will guide arbitration practice for years to come, while also signalling the need for legislative clarity in this evolving area of law.