Referral Court Should Leave It For Arbitral Tribunal To Decide Whether Non-Signatory Is Bound By Arbitration Agreement: SC
The Supreme Court reiterated that at the referral stage, the referral court should leave it for the Arbitral Tribunal to decide whether the non-signatory is bound by the arbitration agreement.
A CJI-led Constitution bench of the Supreme Court in Cox and Kings Ltd. v. SAP India Pvt. Ltd. in December, 2023 had upheld the validity of the “group of companies” doctrine in Indian arbitration jurisprudence.
In this case, the Bench of Chief Justice Dhananjaya Y. Chandrachud, Justice J.B. Pardiwala and Justice Manoj Misra noted the following observation made in the Constitution Bench judgment: “At the referral stage, the referral court should leave it for the Arbitral Tribunal to decide whether the non-signatory is bound by the arbitration agreement"
Advocate Hiroo Advani represented the petitioner, while Senior Advocate Ritin Rai appeared for the respondent.
Cox & Kings Ltd. (petitioner) has filed a petition under Section 11(6) read with Section 11(12)(a) of the Act, seeking the appointment of an arbitrator for the adjudication of disputes and claims in terms of the Services General Terms and Conditions Agreement entered into between the petitioner and SAP India Pvt. Ltd. (respondent).
The petitioner submitted that as per the decision of the Constitution Bench in Cox and Kings Ltd. (supra), the court at the stage of referral was only required to look prima facie into the validity and existence of an arbitration agreement and should leave the questions relating to the involvement of the non-signatory to the arbitral tribunal.
The respondent submitted that allowing parallel arbitration proceedings emanating from the same agreement and transaction would entail a risk of conflicting judgments on the same subject matter including the analogous set of facts in evidence. It was further submitted that the principles of res sub-judice and res judicata would be attracted to the second arbitration proceedings.
The Supreme Court stated that the involvement of a non-signatory to the arbitration agreement was an appropriate question for the arbitral tribunal to consider. The Bench reiterated its stance in Cox and Kings Ltd. (supra), wherein it was held that “the issue of determining parties to an arbitration agreement goes to the very root of the jurisdictional competence of the Arbitral Tribunal.”
“In view of the complexity involved in the determination of the question as to whether the respondent no. 2 is a party to the arbitration agreement or not, we are of the view that it would be appropriate for the arbitral tribunal to take a call on the question after taking into consideration the evidence adduced before it by the parties and the application of the legal doctrine as elaborated in the decision in Cox and Kings,” the Court held.
Consequently, the Court ordered, “We appoint Shri Justice Mohit S. Shah, former Chief Justice of the High Court of Judicature at Bombay to act as the sole arbitrator.”
Accordingly, the Supreme Court allowed the petition.
Cause Title: Cox & Kings Ltd. v. SAP India Pvt. Ltd. & Anr. (Neutral Citation: 2024 INSC 670)
Appearance:
Petitioner: Advocates Hiroo Advani, Vindhya Mehra, Madhur Jhavar, Praveena Bisht, Kartik Lahoti, Navdeep Dahiya, Kumar Vinayakam Gupta, Mallika Luthra, Saksham Barsaiyan, Karandeep Dahiya, Surbhi Saran, Ria Garg and Rahul Maheshwari; AOR Nagarkatti Kartik Uday and Divyakant Lahoti
Respondent: Senior Advocate Ritin Rai; Advocates Farhad Sorabjee, Kumar Kislay, Pratik Pawar, Siddhesh Pradhan, Shanaya Cyrus Irani, Anirudh Krishnan, Shiva Krishnamurti, George Pothan Poothicote, Manisha Singh, Jyoti Singh, Ashu Pathak, Ajay Bhargava, Aseem Chaturvedi, Trishala Trivedi, Ujjwal A. Rana and Himanshu Mehta; AOR Dheeraj Nair, Balaji Srinivasan, Arunava Mukherjee, Debesh Panda and Pallav Mongia