Non-Signatory Parties Can Be Referred to Arbitration After Prima Facie Review: SC

Ajay Madhusudan Patel & Ors. Vs Jyotrindra S. Patel & Ors. (Supreme Court of India)

Summary: The Supreme Court considered whether the SRG Group, admittedly a non-signatory to the Family Arrangement Agreement (FAA) dated 28.02.2020, could be referred to arbitration along with the AMP and JRS Groups. The petition arose under Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996 for appointment of a sole arbitrator in disputes concerning implementation of the FAA and its amendment dated 15.05.2020. The Court examined the evolution of the law governing the limited jurisdiction of the referral court, including Section 11(6A), and considered the principles stated in SBP & Co., National Insurance Co. Ltd. v. Boghara Polyfab, Duro Felguera, Vidya Drolia, In Re: Interplay and Cox and Kings.

It held that, in a case involving joinder of a non-signatory, the referral court is required to prima facie examine the existence of the arbitration agreement and whether the non-signatory is a veritable party. Where that determination involves complex factual questions, the matter should be left to the Arbitral Tribunal under Section 16, consistent with the doctrine of competence-competence. In the present case, the Court noted the interdependent arrangements concerning Millenium Estates Pvt. Ltd. and Deegee Software Pvt. Ltd., the participation of the SRG Group in negotiations and implementation, the exchange of emails, and the disputed question whether representatives had acted for the SRG Group.