A non-signatory may be bound by an arbitration agreement under the 'veritable parties' doctrine if their conduct and involvement in the performance of a composite transaction, involving multiple interconnected agreements, clearly demonstrate an intent to be bound by the master agreement, irrespective of isolated exclusionary clauses.

JUDGMENT :

SANJAY KUMAR, J

1. Leave granted.

2. The scope of this appeal falls within a narrow compass. Notice was ordered in this matter on 31.01.2025 limited to the observations made in paragraph Nos. 103 and 104 of the impugned judgment dated 21.10.2024 passed by the Delhi High Court in Arbitration Petition No. 38 of 2024.

3. The short issue that arises for consideration, in the context of paragraph Nos. 103 and 104 of the judgment, is whether respondent No. 1 herein, Ashiesh Shukla, who was arrayed as respondent No. 6 in the arbitration petition before the High Court, would also be bound by the clauses in the Memorandum of Settlement dated 09.05.2022 and would, in consequence, qualify as a veritable party for the purposes of the arbitration proceedings initiated thereunder.

4. The relevant facts: KKH Finvest Private Limited, appellant No. 1, is involved in the business of investment, consultancy, development and promotion of business activities of companies. Appellant No. 1 intended to take over Sensorise Digital Services Private Limited, appellant No. 2, and its sister concern, Sensorise Smart Solutions Private Limited, under Memorandum of Settlement dated 09.05.2022 (MoS). Ashiesh Shukla, respondent No. 1, was not a signatory to the MoS, which was signed by appellant No.1 along with appellant No.2, its sister concern and their promoters, i.e., Sharad Arora and Rajeev Arora. Appellant No. 1 was referred to as the ‘buyer’ therein while the following were collectively referred to as the ‘ex-Promoter group’ or ‘Sellers’:

a. ex-Promoters as defined in Schedule 1;

b. the Management Team (MT) as defined in Schedules 1A and 1B;

c. Consultants/Employee Shareholders and ex-MT Members defined in Schedule 2 and 2A; and

d. Shareholding Family Members and Associate Shareholders defined under Schedule 2B.

5. Schedule 1 listed the ex-promoters as Rajeev Arora and Sharad Arora. Schedule 1A named four MT members: Ajay Nandy, Abhishek Batra, Prasun Nigam and Achin Jain. Schedule 1B named a foreign shareholder/MT member with whom we are not concerned. Schedule 2, titled ‘List of consultants/employee shareholders’ named Ashiesh Shukla as a shareholder with 1480 shares, constituting a 0.05% shareholding, along with another person with whom we are not concerned. Similarly, Schedules 2A and 2B are not of relevance presently.

6. Clause H of the MoS recorded that, based on a consensus that the buyer would acquire the shares of the sellers and in order to sustain and maintain appellant No. 2 and its sister concern, the parties to the MoS had arrived at an understanding to resolve all their disputes once and for all. Clause I stated that, further to discussions, the buyer agreed to take initial handover of appellant No. 2 and its sister concern and purchase the complete shareholding of the sellers for Rs.8 crores. The clause recorded that the shareholding of the persons named in Schedules 1, 1A, 1B and Schedules 2, 2A and 2B would also be transferred to the buyer.

7. Clause K recorded that, for the sake of convenience, simultaneous with the MoS, separate Share Purchase Agreements, containing indemnity, non-disclosure, non-compete and non-solicitation clauses, and share transfer forms would be executed with persons enlisted in Schedules 1A, 1B and Schedule 2. It recorded that the ex-promoters would render full co-operation and assistance in the execution of the said Share Pur