In ASF Buildtech Private Limited v Shapoorji Pallonji & Co Private Limited[1] (ASF Buildtech), the Supreme Court recently clarified that an arbitral tribunal has the power to implead a non-signatory who is bound by an arbitration agreement.
Along with the key findings in ASF Buildtech, this piece sets out a few thoughts on the test for joining non-signatories and the extent of an arbitral tribunal’s jurisdictional powers in India.
FACTUAL BACKGROUND
The dispute under arbitration arose from a settlement agreement and works contract involving Shapoorji Pallonji & Co Pvt Ltd (Shapoorji) and Black Canyon SEZ Pvt Ltd (Black Canyon). Shapoorji filed a counterclaim against ASF Buildtech Pvt Ltd and ASF Insignia SEZ Pvt Ltd (collectively, ASF Entities) – who were not signatories to the works contract.
The ASF Entities challenged the tribunal’s jurisdiction, claiming that the tribunal cannot and should not join the ASF Entities. The arbitrator dismissed this challenge, noting that the ASF Entities’ impleadment needs a detailed examination – which cannot be made without adding them as parties.
In ASF Buildtech’s appeal, filed under Section 37(2) of the Arbitration Act, the Delhi High Court upheld the impleadment – albeit finding that the arbitrator wrongly conflated the ‘group of companies doctrine’ (GOC Doctrine) with lifting the corporate veil. The High Court also confirmed that ASF Insignia (and the ASF Group overall) had assumed responsibility for making payments to Shapoorji and implementing the project.
SUPREME COURT’S ANALYSIS
The Supreme Court identified two misconceptions responsible for the then prevailing aversion to upholding an arbitral tribunal’s power to implead. One, the Arbitration and Conciliation Act 1996 (Arbitration Act) confers no express power of impleadment on courts or tribunals. Two, previous decisions have required the referral court to dispose of all preliminary issues – including impleadment of non-signatories.
SBP v Patel Engineering[2] (SBP) made it mandatory for courts to decide all preliminary issues at the referral stage. Separately, Chloro Controls v Severn Trent[3] sourced the GOC Doctrine to ‘parties claiming through or under a party’ under Sections 8 and 45 of the Arbitration Act. Therefore, a non-signatory’s impleadment had to be decided by the referral court – not the tribunal.
While SBP was legislatively overruled by the 2015 and 2019 amendments to the Arbitration Act, Vidya Drolia v Durga Trading[4] (Vidya Drolia) nonetheless required referral courts to dispose of ‘deadwood’ claims. This short window, too, was shut in SBI General Insurance v Krish Spinning[5] (Krish Spinning). Relying on the Stamp Duty Judgment[6], Krish Spinning held that all preliminary issues – including deadwood matters – must be decided by the tribunal.
Meanwhile, Cox & Kings v SAP[7] (Cox & Kings) clarified that a non-signatory to whom the GOC Doctrine applies is a ‘party’ – not ‘a party claiming through or under a party.’ Therefore, it was held that an arbitral tribunal is entirely competent to decide who is a veritable party – not least since it has the benefit of pleadings and evidence.
The Supreme Court noted that it is not enough to merely recognise the complexities of multi-party and multi-contract arrangements, albeit without compromising consent and party autonomy. They must also be effectuated by the tribunal. The Court viewed Section 16 from the ‘always speaking’ principle of statutory interpretation, by which statutory words speak continuously and carry a contemporary meaning. Section 16 is meant to uphold parties’ intention to arbitrate and curb judicial interference in matters the tribunal can decide. Section 16 categorically provides for the tribunal to ‘rule on’ – not just consider or review – all questions of its jurisdiction. The tribunal also has the power to give effect to its ruling. Accordingly, given a tribunal can (and must) decide who is veritable party as part of its jurisdictional powers, Section 16 necessarily intends that the tribunal also have the power to implead a party who is decidedly bound by the arbitration agreement.
The Supreme Court also clarified that the parties’ agreement sets the arbitral process in motion – but it is not determinative of the tribunal’s jurisdiction. The true source of arbitral jurisdiction is the legal effect of an arbitration agreement.
Existence vis-à-vis a non-signatory
The Court also clarified that the examination under Section 11 does not extend to whether an arbitration agreement exits qua a non-signatory is a party. The latter is a matter of consent and, as such, should be decided by the tribunal. Even if the referral court believes that a non-signatory is not a veritable party, it would be open for the tribunal to determine the issue.
The Court noted that fairness also lies in giving due time and respect to the arbitral process. The non-signatory’s concerns remain protected, including through Sections 16, 34 and 37. While determining who is a veritable party, however, the non-signatory must be heard by the tribunal – including on jurisdictional objections. The tribunal should decide the impleadment at the earliest opportunity. It should also mitigate, by imposing costs or otherwise, any prejudice caused to the non-signatory.
The test of a veritable party
Cox & Kings v SAP observed that all parties – including the non-signatories in question – should evince a mutual intention to arbitrate. Mere membership of a corporate group is not enough. ONGC v Discovery Enterprises Pvt. Ltd. & Anr[8] required the following factors to apply the GOC Doctrine:
· The mutual intent of the parties;
· The relationship of a non-signatory to a party which is a signatory to the agreement;
· The commonality of the subject-matter;
· The composite nature of the transactions; and
· The performance of the contract.
[Discovery Test]
The Supreme Court upheld and applied the Discovery Test in ASF Buildtech.
Prior notice to the non-signatory
It was also clarified that a non-signatory can be impleaded in an arbitration, including in a counterclaim, even if it did not receive a notice under Section 21 or was not a party to referral proceedings.
COMMENT
Under Indian law, non-signatories can be bound by contracts in exceptional cases, e.g. in cases of waiver, election, or estoppel. The Contract Act, too, recognises implied acceptance of agreements.[9] The deeply entrenched principle of separate legal personality also has exceptions, including alter ego and lifting the corporate veil. Each principle has a high threshold.[10] If the relevant threshold is met, there is no reason these principles should not apply to arbitration.
That said, an arbitration agreement is not a plain contract. It must satisfy the requirements of Section 7 of the Arbitration Act. On the one hand, Section 7 has an in-built flexibility. An arbitration agreement can exist in an unsigned document.[11] It can also be culled from exchange of documents. On the other hand, an agreement to arbitrate cannot be inferred by incorporation unless the parties express an unambiguous intention to incorporate the arbitration clause. The latter contract must specifically refer to the arbitration clause in the contract sought to be incorporated. [12] Therefore, Section 7 also places limitations on inferring consent to arbitrate.
The Discovery Test seems a bit too broad – particularly to the extent considers conduct outside the contract and arbitration agreement; such as one’s role in negotiations and performance surrounding the contract. It will be interesting to see how it is applied against clauses on entire agreement[13], exclusion of liability, no-waiver (among others) – which are quite common in commercial agreements. The test may also be streamlined by the rule on parol evidence[14], which excludes evidence of any oral agreements regarding written instruments.
Commercial reality
In Cox & Kings, the Supreme Court cited commercial reality while recognising a non-signatory’s implied consent to arbitrate. ASF Buildtech also alludes to this commercial reality.[15] However, parties to complex transactions are often well abreast of commercial reality. Indeed, they create it. Such transactions are heavily negotiated and, often with expert assistance, infused with specific allocations of risk and liability among participants. Though involved in the composite transaction, a non-signatory may not be aligned on the law applicable to the arbitration agreement, the arbitral institution (or lack thereof), number of arbitrators, venue, or seat. Therefore, impleading a non-signatory in arbitration can also be contrary to the commercial reality designed by transaction participants.
Tribunal’s jurisdiction
Arbitral jurisdiction is fundamentally a creation of statute. Without the Arbitration Act, even a mutually appointed arbitrator’s decisions would have no legal effect. It is Section 16 that breathes legal life into an arbitral tribunal. Notably, it does not provide for parties to agree otherwise. While parties retain their freedom of contract, including their choice to arbitrate and arbitral procedure, they cannot cannot dilute arbitral jurisdiction.[16] Therefore, while a valid arbitration agreement acts as the trigger, an arbitral tribunal is arguably not a creature of consent or party autonomy.[17]
Section 16 categorically provides for an arbitrator to rule on her own jurisdiction. It does not prescribe any specific fetters on this jurisdictional power. Not all components and contours of a statutory power need to be spelled out in the empowering provision. For instance, the Arbitration Act does not expressly say that an arbitral tribunal can grant specific performance – though it does.[18] A natural part of jurisdiction is personal jurisdiction or jurisdiction ratione personae.[19] Coupled with the tribunal’s negative competence (i.e. judicial non-interference) and procedural autonomy, the plain language of Section 16 should suffice to uphold an arbitral tribunal’s power to decide if a non-signatory is a veritable party and, if yes, if it should be impleaded to the arbitration. It may well turn out that a non-signatory is not a veritable party. However, this does not affect the position that impleadment is within the tribunal’s jurisdiction. Respectfully, this was always the position under the Arbitration Act – and ASF Buildtech rightly affirms it.
Importantly, the fact that a non-signatory may have no say in the appointment of arbitrator(s) is not necessarily prejudicial, since no person gains any legal mileage from the appointment of its nominee.[20] If a non-signatory is joined, each arbitrator should reconfirm her independence and impartiality. The non-signatory can also challenge any existing arbitrator’s appointment on the grounds available in the Arbitration Act. Of course, the tribunal’s exercise of its power to implead will also also remain subject to judicial review.
Concluding thoughts
The Supreme Court’s decision in ASF Buildtech is an emphatic confirmation of arbitrator autonomy. However, with great power comes great responsibility. Impleading non-signatories can go wrong. If based merely on a non-signatory’s role in negotiations or overall performance of a contract, it can also lead to unintended dilution of the parties’ distribution of risk and liability.
While the Supreme Court rightly reassures non-signatories with access to costs and challenges under Section 16 (among others), it will be interesting to see how the Discovery Test develops over time. Legislative changes may also play a significant role.[21]
Until then, ASF Buildtech will pave the way.
***
Disclaimer – All views expressed in the post above are strictly personal and purely for discussion. They do not necessarily represent the views of any organisation with which the author is affiliated.
[1] 2025 INSC 616, Pardiwala and Mahadevan JJ, decision dated 2 May 2025.
[2] (2005) 8 SCC 618. See ASF Buildtech at paras 49-50,
49. The aforesaid view occupied the field till the seven-Judge Bench decision of this Court in SBP & Co. (supra) which held that the power conferred upon the Chief Justice or his designate under Section 11 of the Act, 1996 is a judicial power and not merely an administrative power. It held that being a judicial power, the Chief Justice or his designate had the right to decide all preliminary issues at the referral stage under Section 11(6) of the Act, 1996, and that the power of the arbitral tribunal to rule on its own jurisdiction under Section 16 would come into the picture only when the parties go before the arbitral tribunal without recourse to the courts either under Sections 8 or 11 respectively of the Act, 1996.
50.The ultimate effect of the ratio of SBP & Co. (supra) was that the scope for interference available to the referral courts when acting under Section 11 of the Act, 1996 was substantially expanded, and the referral courts were not only empowered but also expected to conduct mini trials and indulge in the appreciation of evidence on various issues concerned with the subject matter of arbitration.
[3] (2013) 1 SCC 641
[4] Vidya Drolia & Ors v. Durga Trading Corporation, (2021) 2 SCC 1 at Para 154.1
[5] SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532
[6] In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1966 and the Indian Stamp Act 1899, 2023 INSC 1066
[7] Cox & Kings Ltd. v. SAP India (P) Ltd., 2023 INSC 1051
[8] (2022) 8 SCC 42
[9] Section 9 of the Contract Act 1872,
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.
[10] See e.g., Kalparaj Dharamshi v. Kotak Investment Advisors Ltd 2021 SCC OnLine SC 204 regarding waiver and estoppel; and Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 regarding separate legal personality and lifting the corporate veil.
[11] See Glencore International AG v M/s Shree Ganesh Metals and another, 2025 INSC 1036. At paragraph 19, the Supreme Court observes that “…[t]he mere fact that Contract No. 061-16-12115-S was not signed by respondent No.1 would not obviate from this principle when the he conduct of the parties in furtherance of the said contract, clearly manifested respondent No. 1’s acceptance of the terms and conditions contained therein, which would include the arbitration agreement in clause 32.2 thereof.” Also see, Caravel Shipping Services Private Limited v. Premier Sea Foods Exim Private Limited (2019) 11 SCC 461.
[12] 2024 INSC 218, see Para 22
[13] See Neelkanth Mansions and Infrastructures Private Limited and Ors. v. Urban Infrastructure Ventures Capital Limited and Ors, 2018 SCC OnLine Bom 5970
[14] See Bharatiya Sakshya Adhiniyam, 2023, Section 95: Exclusion of evidence of oral agreement.
When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to section 94, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to, or subtracting from, its terms:
Provided that any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto; such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration, or mistake in fact or law:
Provided further that the existence of any separate oral agreement as to any matter on which a document is silent, and which is not inconsistent with its terms, may be proved. In considering whether or not this proviso applies, the Court shall have regard to the degree of formality of the document:
Provided also that the existence of any separate oral agreement, constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved:
Provided also that the existence of any distinct subsequent oral agreement to rescind or modify any such contract, grant or disposition of property, may be proved, except in cases in which such contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents:
Provided also that any usage or custom by which incidents not expressly mentioned in any contract are usually annexed to contracts of that description, may be proved:
Provided also that the annexing of such incident would not be repugnant to, or inconsistent with, the express terms of the contract:
Provided also that any fact may be proved which shows in what manner the language of a document is related to existing facts.
[15] ASF Buildtech at Para 125
[16] See also, ASF Buildtech at Para 117
Since the aspect of joinder of a party to the arbitration agreement, either signatory or non-signatory stems from a conjoint reading of Section(s) 2(1)(h) and 7 of the Act, 1996 as explained by Cox and Kings (I) (supra) and by us in the foregoing paragraphs, even if the parties are to agree that a tribunal or for that matter a referral court will not have the power to implead any party to the arbitration proceeding, such an agreement will only operate to the extent that (i) the arbitration agreement is not governed by the Act, 1996 i.e., does not fall under Part I of the Act, 1996 and (ii) that such party is not otherwise bound by the arbitration agreement.
[17] See ASF Buildtech at Para 141
The jurisdiction of an arbitral tribunal is not created by the mere subjective intent or volition of the parties. Rather, it is the arbitration agreement—a legally cognisable and objective instrument—that operates as the foundational source of jurisdiction in the eyes of the law. Just as the creation of a property automatically vests jurisdiction in the territorial courts competent to adjudicate over such property, the conclusion of an arbitration agreement ipso jure brings into existence the jurisdiction of the arbitral tribunal. This jurisdiction exists in a de jure sense from the moment the arbitration agreement is validly executed, regardless of whether the tribunal has been formally constituted
[18] See Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. & Ors. (2011) 5 SCC 532. See also, Olympus Superstructures Pvt Ltd vs. Meena Vijay Khetan and others, 1999 (5) SCC 651 at Para 34,
“We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree – with a view to shorten litigation in regular courts – to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immoveable property.” (emphasis added)
[19] Adavya Projects v Vishal Structurals, 2025 INSC 507
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 agreement itself. Therefore, the arbitral tribunal’s jurisdiction must be determined against the touchstone of the arbitration agreement.
[20] See also ASF Buildtech at para 108
“…Could it be said that where, the signatories have consensually appointed an arbitrator in terms of the arbitration agreement, then in such cases, the arbitral tribunal that has been so constituted, would not be empowered to implead a non-signatory as-well, merely because, the referral court did not either determine the ‘existence of the arbitration agreement qua the non-signatory’ or did not leave such question for determination of the arbitral tribunal, even though no such occasion had arisen for the referral court to do so? The answer to the aforesaid, must be an emphatic “no””
[21] See ASF Buildtech at para 170
Unfortunately, even the new Bill has taken no steps whatsoever, for ameliorating the position of law as regards the power of impleadment or joinder of an arbitral tribunal. What is expressly missing in the Act, 1996 is still missing in the Arbitration and Conciliation Bill, 2024, despite a catena of decisions of this Court as-well as the various High Courts, highlighting the need for statutory recognition of such power in order to obviate all possibilities of confusion. As observed in Gayatri Balasamy (supra), any uncertainty in the law of arbitration would be an anathema to business and commerce. We urge, the Department of Legal Affairs, Ministry of Law and Justice to take a serious look at the arbitration regime that is prevailing in India and bring about necessary changes while the Arbitration and Conciliation Bill, 2024 is still being considered.
