Kiran Raj

The Supreme Court of India Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan dismissed the appeal filed by ASF Buildtech Private Limited challenging the orders of the High Court of Delhi in relation to impleadment of non-signatories in arbitration proceedings. The Court held that no error could be found in the High Court's decision which upheld the arbitral tribunal's determination that non-signatories could be joined as parties based on the Group of Companies doctrine and principles relating to composite transactions and common intention. The Bench ruled that once the arbitral tribunal had exercised jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996, such determination must be allowed to take its course unless ex facie infirmities were shown. The Court rejected all arguments raised on behalf of the appellant challenging the joinder and confirmed that impleadment in such cases was permissible in law.

The dispute arose from arbitral proceedings relating to the implementation of a settlement agreement dated 24 July 2020. Black Canyon SEZ Pvt. Ltd. (BCSPL) had initiated arbitration against Shapoorji Pallonji and Company Pvt. Ltd. (SPCPL) before a sole arbitrator. During the course of the proceedings, SPCPL filed a counterclaim. This counterclaim was directed not only against BCSPL but also against two other companies — ASF Buildtech Pvt. Ltd. (ABPL), which was the appellant before the Supreme Court, and ASF Insignia SEZ Pvt. Ltd. (AISPL). All three companies were part of what SPCPL termed as the "ASF Group".

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SPCPL contended that under the Works Contract dated 21 November 2016 and the doctrine of Group of Companies, BCSPL, AISPL and ABPL should all be treated as bound by the arbitration agreement. The assertion was based on facts such as common management, shared branding (ASF Group insignia), overlapping contractual obligations, and the joint handling of project performance matters. It was further argued that ASF Group presented itself as a single economic unit during all stages of contract negotiation, performance, and termination.

ABPL and AISPL objected to their impleadment in the counterclaim. They filed separate Section 16 applications before the arbitral tribunal questioning its jurisdiction to proceed against them as non-signatories to the arbitration agreement. The tribunal, in its orders dated 23 May 2023 and 17 October 2023, rejected their objections. It observed that to determine whether ABPL and AISPL were veritable parties to the arbitration agreement required factual adjudication, which could only be done if they were joined as parties to the arbitration proceedings.

Aggrieved by the arbitral tribunal’s orders rejecting their challenge under Section 16, ABPL, along with others, approached the High Court of Delhi under Section 37 of the Arbitration and Conciliation Act, 1996. The High Court dismissed the appeals on 4 July 2024. It concluded that impleadment of ABPL and AISPL was justified based on materials showing their participation in negotiations, execution, and performance of contracts. The High Court also held that the doctrine of Group of Companies was applicable to ascertain mutual intent and close commercial relationships among ASF entities.

The High Court noted that the ASF Group presented itself as a cohesive unit. The communications and conduct revealed that AISPL and ABPL were actively involved in contractual obligations, including financial undertakings. The High Court held that arraying them as parties was essential for comprehensive adjudication of claims and counterclaims. The challenge based on absence of privity was thus rejected.

Following dismissal of the appeals, ABPL alone remained aggrieved and approached the Supreme Court of India by filing a Special Leave Petition, which was subsequently converted into Civil Appeal No. 5823 of 2025. The central challenge before the Supreme Court was based on two fundamental contentions. First, it was urged that being a non-signatory, ABPL could not be subjected to arbitration without its explicit consent. Second, it was argued that the arbitral tribunal lacked jurisdiction to implead ABPL merely on the basis of commercial connections or corporate structure unless such impleadment was authorised by the court at the referral stage under Section 11 of the Act.

The respondent, SPCPL, defended the orders of the arbitral tribunal and the High Court. It argued that ABPL was deeply integrated into the project, assumed direct and indirect obligations, participated in negotiations, and actively interacted with SPCPL at every stage. It was further submitted that ABPL's impleadment was necessary to avoid multiplicity of proceedings and that the arbitral tribunal, under the principle of Kompetenz-Kompetenz, was empowered to decide jurisdictional questions at the threshold itself.

The matter before the Supreme Court thus raised significant issues regarding:

• Whether a non-signatory to an arbitration agreement can be impleaded by the arbitral tribunal invoking the Group of Companies doctrine.

• Whether such impleadment could be contested at the threshold stage before conclusion of arbitral proceedings.

• The scope of judicial intervention at the stage of Section 16 decisions by the arbitral tribunal.

In these circumstances, the Supreme Court proceeded to examine the appeal filed by ABPL in light of the arbitration law jurisprudence on joinder of non-signatories, Kompetenz-Kompetenz, and the balance between arbitral autonomy and party consent.

The appellant, ASF Buildtech Pvt. Ltd. (ABPL), challenged the orders of the arbitral tribunal and the High Court primarily on the ground that it, as a non-signatory, could not be impleaded as a party to the arbitration proceedings. The submissions of ABPL were structured on legal and factual grounds, which were laid out before the Supreme Court in detail.

ABPL submitted that there was no material whatsoever to show its involvement in the negotiation, performance, or termination of the agreements forming the subject matter of the arbitration. It was contended that the arbitral tribunal and the High Court had erroneously relied upon three aspects for impleading ABPL:

• That it was the holding company of BCSPL and AISPL.

• That there existed common management among the ASF Group companies.

• That there was usage of a common logo of the ASF Group by the related entities.

The appellant argued that none of these factors fulfilled the legal tests necessary to treat it as a veritable party to the arbitration agreement. It contended that acceptance of such reasoning would lead to a situation where every holding company would automatically be drawn into arbitration concerning its subsidiaries, which, it was argued, is contrary to well-settled law as laid down in precedents including Oil and Natural Gas Corporation v. Discovery Enterprises, Cox and Kings Ltd. v. SAP India Pvt. Ltd., and Ajay Madhusudan Patel v. Jyotrindra S. Patel.

On questions of law, the appellant raised the following essential issues for consideration:

• Whether a non-signatory such as ABPL could be impleaded by the arbitral tribunal through a counterclaim without the referral court having referred it under Section 11 of the Arbitration and Conciliation Act, 1996.

• Whether impleadment could occur without notice of invocation under Section 21 being issued to it.

• Whether merely being a holding company and part of the same group using common email domains and insignia was sufficient to satisfy the tests for invocation of the Group of Companies doctrine.

ABPL asserted that it had no role in any of the following events:

• The negotiation or execution of the Works Contract dated 21 November 2016.

• The execution of the Supplementary Works Contract or the Novation Agreement.

• The issuance of the Letter of Comfort or execution of the Settlement Agreement.

• The invocation of arbitration or submission of claims and counterclaims prior to the arbitration proceedings.

• Section 11 proceedings and filing of statements of claim by BCSPL.

The petitioner emphasized that impleadment happened only when SPCPL filed a counterclaim naming ABPL, and this was done without even seeking leave from the arbitral tribunal to implead a new party. It contended that such impleadment was in clear violation of law and procedure.

ABPL further argued that merely being a holding company did not automatically make it liable or bound by its subsidiaries' contracts. It stated that such an approach would obliterate the doctrine of separate legal personality and introduce uncertainty into company law and arbitration law. The appellant strongly opposed the blending of corporate structures and submitted that without a clear mutual intention to arbitrate, impleadment could not be permitted.

The petitioner also highlighted that the High Court had committed a jurisdictional error by not only upholding the tribunal's decision but also suo motu directing the arbitral tribunal on how evidence should be led and matters adjudicated, which was neither argued nor in issue before it.

In conclusion, ABPL urged the Supreme Court to allow the appeal, set aside the impugned judgment of the High Court, and hold that impleadment of ABPL was illegal and unsustainable in law and on facts. It prayed that the orders of the arbitral tribunal rejecting its Section 16 application be quashed.

SPCPL, the counter-claimant before the arbitral tribunal and respondent before the Supreme Court, opposed the appeal and defended the impleadment of ASF Buildtech Pvt. Ltd. (ABPL) into the arbitration proceedings. The submissions of SPCPL were wide-ranging and focused on both factual background and legal doctrines.

At the outset, SPCPL argued that ABPL was part of a unified ASF Group comprising three companies — BCSPL, AISPL and ABPL. SPCPL asserted that these companies functioned as a single economic entity. They were under common control and management, shared common directors, had the same registered address, used common email domains and branding, and jointly undertook obligations in relation to the project and contracts with SPCPL. According to SPCPL, the ASF Group was represented to SPCPL as a consolidated commercial unit during negotiation, execution and performance of the subject contracts, including the Works Contract dated 21 November 2016 and the Settlement Agreement dated 24 July 2020.

SPCPL argued that the doctrine of Group of Companies was rightly invoked in this case. The respondent contended that this doctrine, recognised by Indian law post Chloro Controls and developed further in Cox and Kings and Ajay Madhusudan Patel, allows impleadment of non-signatories who are factually and commercially intertwined with the signatories and the contract performance. According to SPCPL, the facts demonstrated that ABPL was directly, substantially, and actively involved in the project and dispute, and could not be treated as a mere outsider.

SPCPL further pointed out specific instances of ABPL’s involvement:

• ASF Group’s email on 2 June 2021 conveyed commitments to release SPCPL’s dues.

• Clause 5 of the Settlement Agreement recorded ASF’s obligations towards SPCPL.

• Statements of Accounts annexed to the Settlement Agreement mentioned ASF and not just BCSPL or AISPL.

• The Comfort Letter issued on 17 April 2018 recognised ABPL’s control and management over BCSPL and AISPL.

• ASF officials, representing the group including ABPL, were part of negotiation meetings and project discussions.

• Various project-related documents and minutes showed ABPL’s involvement alongside AISPL and BCSPL in project performance and obligations.

It was thus submitted that ABPL's claim that it was a mere holding company was untenable, and its impleadment as a necessary party was justified. SPCPL also stressed that non-signatories with commercial involvement in the project and inextricable connection with the dispute are capable of being joined to arbitration, relying on Supreme Court precedents.

Addressing the petitioner’s reliance on lack of Section 11 referral, SPCPL contended that after the constitution of the arbitral tribunal, jurisdictional issues fell within the tribunal’s authority under Section 16. Once seized of the matter, the tribunal had the power to decide on its own jurisdiction, including on impleadment of parties. It was submitted that the stage of judicial referral was long over, and impleadment at this stage could not be faulted under law.

On the issue of prejudice, SPCPL argued that no prejudice had been caused to ABPL since impleadment merely allowed adjudication on merits. Whether ABPL was indeed bound by the arbitration agreement was still open to be determined. The tribunal had not finally decided liability, but only permitted ABPL’s participation for comprehensive adjudication of intertwined claims and counterclaims.

SPCPL also contended that ABPL had unsuccessfully challenged the tribunal's decisions on three earlier occasions:

• Section 16 application before the tribunal (rejected on 23 May 2023).

• Further Section 16 application (rejected on 17 October 2023).

• Appeal under Section 37 before the High Court (dismissed on 4 July 2024).

It was submitted that ABPL had exhausted multiple avenues and the present appeal was its fourth attempt, which lacked merit and should be dismissed.

Concluding its submissions, SPCPL urged the Supreme Court not to interfere with the orders of the arbitral tribunal and the High Court. It submitted that impleadment was legally valid and essential for effective and complete adjudication. It prayed for dismissal of the appeal and continuation of the arbitral proceedings without disruption.

The Supreme Court, while considering the issues presented, laid down a detailed and nuanced analysis of the legal position regarding impleadment of non-signatories in arbitral proceedings, the Group of Companies doctrine, and the principle of Kompetenz-Kompetenz.

At the outset, the Court clarified the scope of Section 16 of the Arbitration and Conciliation Act, 1996. It recorded:

"Section 16 empowers the arbitral tribunal to rule on its own jurisdiction. The provision does not merely suggest competence to consider jurisdictional questions, but rather vests in the tribunal the authority to decisively adjudicate and pronounce binding rulings on such issues."

The Bench explained that jurisdictional rulings by the tribunal include determinations on whether a non-signatory could be impleaded, particularly when the issue was not conclusively decided by a referral court at the stage of Section 11. It observed:

"There is nothing in the scheme of the Act which prohibits or restrains an arbitral tribunal from impleading a non-signatory on its own accord, subject to the applicable legal principles including the doctrine of Group of Companies."

The doctrine of Group of Companies was extensively examined. Referring to its development in Indian law, particularly through Chloro Controls and Cox and Kings, the Court noted:

"The doctrine is based on mutual intent inferred from a variety of factual elements. It requires an inquiry into the relationship among group entities, the composite nature of the transactions, their common subject matter, and the participation of the non-signatory in negotiation, performance, and termination of the contract."

It held that a superficial or perfunctory analysis was impermissible, and instead, a close, context-specific examination was necessary:

"Application of the doctrine depends upon a comprehensive and holistic assessment of the composite relationship among the entities concerned, the underlying transactions, and attendant circumstances evincing mutual intention to be bound by the arbitration agreement."

The Court further clarified that the doctrine is not based on mere group structure or incidental involvement. It is founded on demonstrated facts which lead other parties to legitimately believe that the non-signatory was a veritable party to the arbitration agreement.

Addressing the objection that impleadment could only be done at the Section 11 referral stage, the Court held: "The arbitral tribunal being the appropriate forum to determine the issue as to joinder of a non-signatory would undoubtedly have the power to implead such non-signatory."

It rejected the submission that Section 16 does not include power to implead. It was held that once the arbitral tribunal is seized of the dispute, its authority extends to deciding questions relating to its own jurisdiction, including the issue of whether a non-signatory is bound by the arbitration agreement:

"Such impleadment being fundamentally a question of jurisdiction and consent falls squarely within the province of the tribunal’s powers, free from any statutory prohibition."

Discussing the interpretation of statutory provisions, the Court referred to the 'always speaking' doctrine and observed:

"Section 16, when seen in the light of the object of the Act, requires courts to adopt a pragmatic and flexible approach. The arbitral tribunal is empowered to rule decisively on all jurisdictional questions, including whether a non-signatory is a party to the arbitration agreement."

On the significance of mutual intent, the Court held:

"Mere commercial connection is not sufficient. It is only where the relationship and conduct of the parties lead to a legitimate belief that the non-signatory is a veritable party to the arbitration agreement, that the Group of Companies doctrine will apply."

The Court disapproved the argument advanced by the appellant that impleadment could only flow from Sections 16 or 17. It held:

"The power to implead does not emanate from the language of Section 16 or 17 but arises from the implied powers of the arbitral tribunal and the legal doctrines recognised in arbitral jurisprudence."

Lastly, summarising its conclusions on the legal position, the Court observed:

"There is no inhibition in the Act, 1996 which precludes the arbitral tribunal from impleading a non-signatory on its own accord. Such exercise, however, must be predicated upon satisfaction of applicable legal principles, particularly the doctrine of Group of Companies."

Before concluding, the Supreme Court recorded its concern regarding the recurring procedural complexities in arbitration law, particularly the lack of statutory clarity on the power of arbitral tribunals to implead or join non-signatories. The Court observed that despite several decades since the enactment of the Arbitration and Conciliation Act, 1996, and even in the proposed Arbitration and Conciliation Bill, 2024, this area remains inadequately addressed.

It recorded: "It is indeed very sad to note that even after these many years, procedural issues such as the one involved in the case at hand have continued to plague the arbitration regime of India."

The Court noted that although various amendments have been made to streamline arbitration proceedings, legislative attention has not been given to codifying the principles related to impleadment or joinder. The absence of statutory recognition, despite repeated judicial pronouncements, was termed by the Court as a continuing gap:

"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."

The Bench referred to Gayatri Balasamy v. ISG Novasoft Technologies Limited, reiterating that uncertainty in arbitration law is detrimental to the business and commercial environment:

"Any uncertainty in the law of arbitration would be an anathema to business and commerce."

Accordingly, the Court urged the Department of Legal Affairs, Ministry of Law and Justice to take note of this issue and introduce necessary statutory provisions during the finalisation of the Arbitration and Conciliation Bill, 2024:

"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."

The Court held that, in the overall view of the matter, no error could be said to have been committed by the High Court in passing the impugned judgment and order. It recorded:

"In the overall view of the matter, we are convinced that no error, not to speak of any error of law, could be said to have been committed by the High Court in passing the impugned judgment and order."

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The Court further directed that all other legal contentions available to the parties were left open to be decided by the arbitral tribunal. It stated: "All other legal contentions available to the parties are kept open to be canvassed before the Arbitral Tribunal."

The Court ordered: "For all the foregoing reasons, this appeal fails and is hereby dismissed."

Additionally, any pending applications also stood disposed of.

Finally, the Court issued a direction to the Registry to ensure circulation of the judgment to all High Courts and to the Government of India for wider awareness of the legal principles discussed. It ordered: "The Registry shall forward one copy each of this judgment to all the High Courts across the country and the Principal Secretary, Ministry of Law and Justice."

Advocates Representing the Parties

For the Petitioner: Ms. Anindita Mitra, Advocate-on-Record

For the Respondents: Ms. Aakanksha Kaul, Advocate, Mr. Saurav Agrawal, Advocate, Mr. Salvador Santosh Rebello, Advocate-on-Record, Mr. Aman Sahani, Advocate, Mr. Anshuman Chowdhary, Advocate, Ms. Rhea Borkotoky, Advocate, Ms. Kritika, Advocate, Mr. Akash Saxena, Advocate, Ms. Ashima Chopra, Advocate, Ms. Prachi Dubey, Advocate, Mr. S. S. Shroff, Advocate-on-Record, Ms. Shruti Sabharwal, Advocate, Ms. Avlokita Rajvi, Advocate, Mr. Lakshya Khanna, Advocate, Ms. Shradha Sriram, Advocate, Mr. Sanyat Lodha, Advocate-on-Record, Ms. Sanjana Saddy, Advocate

Case Title: ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

Neutral Citation: 2025 INSC 616

Case Number: Civil Appeal No. 5823 of 2025 (arising out of Special Leave Petition (C) No. 21286 of 2024)

Bench: Justice J.B. Pardiwala and Justice R. Mahadevan

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