Sanchayita Lahkar

The High Court of Karnataka Division Bench of Justice Jayant Banerji and Justice Umesh M Adiga dismissed a writ petition seeking to set aside an arbitral tribunal’s majority order that impleaded a company which had not signed the joint development agreement into ongoing arbitration proceedings. The Court declined to interfere, holding that the tribunal was entitled to treat a non-signatory as bound by the arbitration agreement where the party’s conduct, linked agreements, and commercial involvement showed a clear intent to be bound, attracting the Group of Companies doctrine. The dispute arose from claims connected to a real-estate development project governed by the joint development agreement, in which arbitration had been invoked by the landowner-side entities against the developer-side entity.

The writ petition was instituted by a real estate developer challenging an order dated 28 November 2024 passed by an arbitral tribunal, whereby an application seeking impleadment of the petitioner as a non-signatory party to ongoing arbitration proceedings was allowed by majority. The arbitration arose out of disputes concerning a joint development project involving landowners, a developer entity, and affiliated companies.

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The claimants before the arbitral tribunal sought impleadment on the basis that the petitioner, though not a signatory to the Joint Development Agreement, had actively participated in the project through earlier framework agreements, financial arrangements, corporate guarantees, correspondence, branding, and continued involvement in execution and performance of the project. The application relied on the “Group of Companies Doctrine” and statutory provisions under the Arbitration and Conciliation Act, 1996.

The petitioner opposed the application contending that all contractual obligations had been novated and assigned to another entity, that it had exited the transaction prior to execution of the Joint Development Agreement, and that its role as guarantor in loan documents was independent of the arbitration agreement. It was further contended that the arbitral tribunal lacked jurisdiction to implead a non-signatory and that interference under Articles 226 and 227 of the Constitution was warranted.

The respondents disputed maintainability of the writ petition, asserting that the arbitral tribunal was competent to rule on its jurisdiction and that the impugned order suffered from no jurisdictional infirmity.

The Court examined the scope of interference under Articles 226 and 227 of the Constitution in relation to interlocutory orders passed by arbitral tribunals. It observed that “the scheme of the Arbitration and Conciliation Act, 1996 contemplates minimal judicial interference in arbitral proceedings” and that supervisory jurisdiction must be exercised with restraint.

While referring to precedents governing arbitral autonomy, the Court recorded that “the Arbitral Tribunal is empowered to decide on its jurisdiction” and that Section 16 of the Act expressly authorises the tribunal to rule on objections relating to existence or scope of the arbitration agreement.

On facts, the Court undertook a detailed examination of the sequence of agreements beginning from the initial agreement dated 26 June 2010, the supplementary agreements, the second supplementary agreement, and the Joint Development Agreement. It noted that “the Agreement, First Supplementary Agreement and the SSA were collectively referred in the JDA as ‘Framework Agreements’” and that the project continued to bear the brand name associated with the petitioner.

The Court further recorded that “Mantri Developers is closely involved in various stages of the project which was being developed along with the claimants despite execution of the SSA and the JDA” and that the petitioner had “an abiding and deep-rooted interest in the success of the project”.

With reference to financial arrangements, guarantees, escrow agreements, correspondence, advertisements, and branding, the Court observed that “there is thus a clear legal relationship between the petitioner-Mantri Developers and the claimants/respondents”.

Applying the principles laid down by the Supreme Court, the Court stated that “the cumulative factors that the Courts and tribunals should consider in deciding whether a company within a group of companies is bound by the arbitration agreement are mandatorily required to be followed”, namely mutual intent, relationship between entities, commonality of subject matter, composite nature of transactions, and performance of the contract.

The Court found that “all the relevant factors prescribed … relating to impleadment of the non-signatory party were duly considered” by the arbitral tribunal and that there was “neither patent lack of jurisdiction nor inherent lack of jurisdiction” in the impugned order.

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The Court directed that “we find no reason to interfere in the impugned majority order of the Arbitral Tribunal in exercise of our jurisdiction under Article 226/227 of the Constitution. This petition is therefore, dismissed. Pending IAs., if any, stand disposed of”.

Advocates Representing the Parties

For the Petitioners: Sri Basavaraj S., Senior Counsel, instructed by Smt. Jaithra J. Narayan, Advocate

For the Respondents: Sri K.G. Raghavan, Senior Counsel, instructed by Sri Pradeep Naik, Advocate; Sri Dhananjay Joshi, Senior Counsel, instructed by Sri Anish Acharya, Advocate.

Case Title: Mantri Developers Pvt. Ltd. v. Gokulam Shelters Pvt. Ltd. & Ors.
Case Number: WP No. 36101 of 2024
Bench: Justice Jayant Banerji, Justice Umesh M. Adiga