Non-Signatories to Arbitration I

The legal position as to when a Non­-Signatory to an Arbitration Agreement can be impleaded and subjected to Arbitration Proceedings is no more res integra. Three-Judge Bench in Chloro Controls India Private Limited, (2013) 1 SCC 641 opined, invoking ‘Doctrine of Group of Companies’, Arbitration Agreement entered by a Company, being one within a Group of Corporate Entities, can, in certain circumstances, bind its Non-Signatory Affiliates. That exposition has been followed and applied by another Three-Judge Bench of this Court in Cheran Properties Limited, (2018) 16 SCC 413.

Hon’ble A.M. Khanwilkar, Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited, [Arbitration Petition (Civil) No. 65 of 2016].

Therefore, factors such as relationship of a Non-Signatory to a Signatory, commonality of subject-matter and composite nature of transaction weigh in balance. ‘Group of Companies Doctrine’ is essentially intended to facilitate fulfillment of a mutually held intent between parties, where circumstances indicate intent was to bind both Signatories and Non-Signatories. The effort is to unravel from a layered structure of commercial arrangements, an intent to bind someone who is not formally a Signatory but has assumed obligation to be bound actions of Signatories.

– Hon’ble Justice Dr. D.Y. Chandrachud, Cheran Properties Limited, (2018) 16 SCC 413.