1. Appointment of arbitrator under Section 11(6), Arbitration and Conciliation Act, 1996 — Dispute arising from settlement agreement — Joinder of non-signatory parties to arbitration. (Para 1 , 2 , 11 , 12 , 14 , 22 , 25 )
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2024 Supreme(SC) 804
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, CJI, J.B. PARDIWALA, MANOJ MISRA, JJ.
Ajay Madhusudan Patel and Others – Petitioners
Versus
Jyotrindra S. Patel and Others – Respondents
Arbitration Petition No. 19 of 2024
Decided On : 20-09-2024
Important Points
The court ruled that non-signatories may be bound by arbitration agreements if their conduct indicates consent, but complex factual questions regarding such consent should be resolved by the Arbitral Tribunal.
Subject
Arbitration Law - Appointment of Arbitrator
Act Referred
Headnote
(A) Arbitration and Conciliation Act, 1996 - Sections 11(6) and 11(9) - Petition for appointment of a Sole Arbitrator - Dispute between AMP Group and JRS Group regarding Family Arrangement Agreement (FAA) - SRG Group, a non-signatory, involved in negotiations and implementation of FAA - Court finds that SRG Group's involvement indicates potential consent to arbitration - Complexity of determining SRG Group's status as a party to arbitration requires resolution by the Arbitral Tribunal. (Paras 1, 51, 66, 83)
(B) Jurisdiction of Referral Court - The referral court's role is limited to examining the existence of an arbitration agreement, leaving substantive issues for the Arbitral Tribunal. (Paras 52, 60)
(C) Non-signatory parties - Non-signatories can be bound by arbitration agreements if their conduct indicates consent; however, the determination of such consent involves complex factual questions best resolved by the Arbitral Tribunal. (Paras 68, 80)
(D) Conclusion - Petition allowed; Mr. Akil Kureshi appointed as Sole Arbitrator. (Paras 83, 84)
(B) Jurisdiction of Referral Court - The referral court's role is limited to examining the existence of an arbitration agreement, leaving substantive issues for the Arbitral Tribunal. (Paras 52, 60)
(C) Non-signatory parties - Non-signatories can be bound by arbitration agreements if their conduct indicates consent; however, the determination of such consent involves complex factual questions best resolved by the Arbitral Tribunal. (Paras 68, 80)
(D) Conclusion - Petition allowed; Mr. Akil Kureshi appointed as Sole Arbitrator. (Paras 83, 84)
Legal Category Hierarchy
- practice and procedure
- contract law
Advocates appeared:
For the Petitioner(s): Mr. Shamik Shirishbhai Sanjanwala, AOR Mr. Kunal Vyas, Adv. Ms. Shubhangi Agarwal, Adv. Mr. Abhishek Jamalpur, Adv. Mr. Prabhakar Yadav, Adv.
For the Respondent(s): Mr. Anuj K. Trivedi, Adv. Ms. Anushree Prashit Kapadia, AOR M/S. Karanjawala & Co., AOR
For the Petitioner(s): Mr. Shamik Shirishbhai Sanjanwala, AOR Mr. Kunal Vyas, Adv. Ms. Shubhangi Agarwal, Adv. Mr. Abhishek Jamalpur, Adv. Mr. Prabhakar Yadav, Adv.
For the Respondent(s): Mr. Anuj K. Trivedi, Adv. Ms. Anushree Prashit Kapadia, AOR M/S. Karanjawala & Co., AOR
Table of Contents
2. Whether a non-signatory to a settlement agreement can be referred to arbitration based on conduct and composite transactions versus lack of privity and consent. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 )
3. Referral courts must confine examination to the existence of an arbitration agreement; complex factual determinations regarding non-signatories are best left to the arbitral tribunal. (Para 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 81 , 82 )
4. The referral court should leave the determination of whether a non-signatory is a veritable party to the arbitration agreement to the arbitral tribunal's jurisdictional competence. (Para 63 , 64 , 80 )
5. Petition allowed — Sole arbitrator appointed to adjudicate disputes, including those involving the non-signatory group, subject to the tribunal's ruling on jurisdiction. (Para 83 , 84 )
6. What is the scope of the referral court's jurisdiction when appointing an arbitrator under Section 11(6) of the Act?
The court must confine its examination to the existence of the arbitration agreement. Substantive objections regarding existence and validity based on evidence should be left to the arbitral tribunal under the doctrine of competence-competence. (Para 56 , 57 , 61 , 62 )
7. Under what circumstances can a non-signatory be bound by an arbitration agreement?
A non-signatory may be bound if they intended or consented to be bound through their acts or conduct, such as positive, direct, and substantial involvement in the negotiation, performance, or termination of the underlying contract. (Para 68 , 69 , 70 , 71 )
8. Should a referral court decide whether a non-signatory is a party to an arbitration agreement?
Due to the complexity of such determinations, the referral court should leave it for the arbitral tribunal to decide whether the non-signatory is a veritable party based on factual evidence and legal doctrine. (Para 63 , 64 , 80 )
9. Does the nomenclature of an agreement, such as 'Family Arrangement Agreement', determine its legal character for arbitration purposes?
No, the nomenclature of an agreement is not determinative of its character; the court focuses on the substance and the intention of the parties to be bound. (Para 31 , 81 )
JUDGMENT :
J.B. PARDIWALA, J.
1. For the convenience of exposition, this judgment is divided in the following parts:
| INDEX | |
| (A) | FACTUAL MATRIX |
| (B) | SUBMISSIONS ON BEHALF OF THE PETITIONER (AMP GROUP) |
| (C) | SUBMISSIONS ON BEHALF OF THE RESPONDENT (JRS GROUP) |
| (D) | SUBMISSIONS ON BEHALF OF THE RESPONDENT (SRG GROUP) |
| (E) | ANALYSIS |
| (i) Scope of jurisdiction of the referral court under Section 11(6) of the Act, 1996 | |
| (ii) Whether on a prima facie view, the SRG Group being a non-signatory to the FAA, can be referred to arbitration? | |
| (F) | CONCLUSION |
1. The present petition has been filed under Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996 (hereinafter, “the Act, 1996”) seeking appointment of a Sole Arbitrator to adjudicate the disputes between the Petitioners and the Respondents in terms of Clauses 7.2 and 7.3 respectively of the Family Arrangement Agreement dated 28.02.2020 (hereinafter, “the FAA”) read with the Amendment Agreement dated 15.05.2020 (hereinafter “Amendment to the FAA”) entered into between the petitioner AMP Group and respondent JRS Group.
2. Since the Petitioner No. 13 i.e. Silvercity Management Ltd. is a company incorporated outside India having its office at 17, Bond Street, St. Helier, Jersey, JE2, 3NP, an island in the English Channel, northwest of France and the Petitioner No. 14 i.e. Hiral Ashit Patel is an individual, who is a citizen and resident of Canada, the dispute between the Parties falls within the definition of an international commercial arbitration under Section 2(1)(f) of the Act, 1996.
(A) FACTUAL MATRIX
3. For convenience, the Parties involved in the present petition and the respective groups of which they form a part of are tabulated below:
| S. No. | Name | Petitioner/Respondent | Group |
| 1. | Ajay Madhusudan Patel | Petitioner No. 1 | AMP |
| 2. | Apoorva Madhusudan Patel | Petitioner No. 2 | AMP |
| 3. | Meeta Ajay Patel | Petitioner No. 3 | AMP |
| 4. | Sonal Apoorva Patel | Petitioner No. 4 | AMP |
| 5. | Bhavik Ajay Patel | Petitioner No. 5 | AMP |
| 6. | Jinal Ajay Patel | Petitioner No. 6 | AMP |
| 7. | Kaushal Apoorva Patel | Petitioner No. 7 | AMP |
| 8. | Nishkal Apoorva Patel | Petitioner No. 8 | AMP |
| 9. | Apoorva M. Patel (HUF) | Petitioner No. 9 | AMP |
| 10. | Spectrum Ingredients Pvt. Ltd. Rep. by its Director | Petitioner No. 10 | AMP |
| 11. | Sai Fragrances & Flavours Pvt. Ltd. Rep. by its Director | Petitioner No. 11 | AMP |
| 12. | Zest Aromas Pvt. Ltd. Rep. by its Director | Petitioner No. 12 | AMP |
| 13. | Silvercity Management Ltd. Rep. by its Chairman | Petitioner No. 13 | AMP |
| 14. | Hiral Ashit Patel | Petitioner No. 14 | AMP |
| 15. | Jyotrindra S. Patel | Respondent No. 1 | JRS |
| 16. | Rajesh C. Patel HUF | Respondent No. 2 | JRS |
| 17. | Sanjay S. Patel | Respondent No. 3 | JRS |
| 18. | Finhelp Investments and Consultants (Mumbai) Pvt. Ltd. Rep. by its Director | Respondent No. 4 | JRS |
| 19. | Greenbiz Holdings and Consultants Pvt. Ltd. Rep. by its Director | Respondent No. 5 | JRS |
| 20. | Jyotrindra S. Patel and Sanjay S. Patel (Holding for and on behalf of J&S Associate - AOP) Rep. by its Member | Respondent No. 6 | JRS |
| 21. | Millenium Estates Pvt. Ltd. Rep. by its Director | Respondent No. 7 | SRG |
| 22. | Deegee Software Pvt. Ltd. Rep. by its Director | Respondent No. 8 | SRG |
| 23. | Samarjitsinh R. Gaekwad (Shareholder & Director of Millenium Estates Pvt. Ltd. and Deegee Software Pvt. Ltd.) | Respondent No. 9 | SRG |
| 24. | Radhikaraje S. Gaekwad (Shareholder of Deegee Software Pvt. Ltd.) | Respondent No. 10 | SRG |
| 25. | Subhanginiraje R. Gaekwad (Shareholder of Deegee Software Pvt. Ltd.) | Respondent No. 11 | SRG |
| 26. | Gaekwad Services Ltd. now known as Gaekwad Enterprise Pvt. Ltd. Rep. by its Managing Directo | ||
