KluwerArbitration
Document information
Publication
ASA Bulletin
Jurisdiction
India
Bibliographic reference
Harshad Pathak, 'India’s
Tryst with Non-Signatories to
an Arbitration Agreement in
Composite Economic
Transactions', in Matthias
Scherer (ed), ASA Bulletin,
(© Association Suisse de
l'Arbitrage; Kluwer Law
International 2018, Volume
36 Issue 3) pp. 597 - 614
P 597 Part two begins by discussing the relevance of non-signatories to an arbitration agreement
P 598 and the competing conceptual considerations involved.
P 598 conceptual issues. At the outset, it merits clarification that the expression ‘extension’ of an
P 599 arbitration agreement,
© 2019 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
India’s Tryst with Non-Signatories to an Arbitration
Agreement in Composite Economic Transactions
Harshad Pathak
(1)
1 Introduction
If one were to ask what can happen in a decade, the responses will invariably vary. But
Indian arbitration lawyers will provide a far more definitive answer. For them, a decade is
the approximate period of time taken by the Supreme Court of India to adapt, or even
reverse, its jurisprudence on important issues of arbitration law. One such issue pertains to
India's tryst with non-signatories to an arbitration agreement in composite economic
transactions. On 3 May 2018, this issue was once again thrust into prominence by the
Supreme Court of India's judgment in Ameet Lalchand Shah and others v Rishabh Enterprises
and another (1) , wherein it had to consider whether several entities involved in a single
commercial project, executed through multiple contracts, can be encompassed by the
arbitration clause contained in the main agreement. While the text of the judgment makes
for a fine reading, its true import can only be appreciated in context of the Indian courts'
evolving understanding of this issue. This is precisely what the present paper endeavours
to do.
Over the past decade, Indian courts, led by its Supreme Court, have addressed the issue of
the effect of an arbitration agreement on related non-signatory entities in a plethora of
circumstances. And like a pendulum, their response has swung from one end of the
jurisprudential paradigm to the other. While initially reluctant to bind non-signatories to
an arbitration agreement as a matter of principle, Indian courts now adopt a pragmatic
approach. They are more inclined to venture beyond the formal constraints of an
arbitration agreement in writing, and identify the entities that may have tacitly consented
to arbitrate despite not signing the written agreement. The subsequent pages map this
interpretational oscillation by reference to judicial pronouncements in India.
In this context, part three
canvasses how Indian courts have addressed this issue, culminating in the aforementioned
judgment. Part four concludes.
2 Non-Signatories and Arbitral Consent: A Divided Paradigm
The expression non-signatories refers to the “less-than-obvious parties to an arbitration
clause: individuals and entities that never put pen to paper, but still should be part of the
arbitration under the circumstances of the relevant business relationship.” (2) While the
issue of determining if a non-signatory entity can be bound by an arbitration agreement
can arise in myriad forms (3) , this paper is confined to situations of composite economic
transactions. In the context of Indian law, it is limited to examining the possibility of
arbitrating disputes arising from one transaction, executed through a series of contracts
between multiple entities, notwithstanding that some of these relevant entities may not
have signed the arbitration agreement invoked. This is similar to the “group of companies”
doctrine, considered to have originated in the Dow Chemicals case (4) , which sought to
answer if an arbitration agreement can bind the entirety of “an economic unit with an
integrated management, beyond the legal personalities of the companies that belong to
it.” (5)
Disputes implicating non-signatories are deemed inevitable in “modern international
business transactions that typically involve complex webs of interwoven agreements,
multilayered legal obligations and the interposition of numerous, often related, corporate
and other entities.” (6) But as widespread as this tendency may be, it raises a number of
though colloquial, lacks conceptual accuracy. When a non-
signatory is determined to be bound by an arbitration agreement, then the parties'
consent to arbitration reflected in the arbitration clause is not really extended; it covers
the non-signatory entity from the outset. (7) In each scenario, the factual inquiry remains
embedded to consent to arbitrate already granted, and thus limited to ascertaining “who
is a party to the clause, or has adhered to it, or eventually is estopped from contending
that it has not adhered to it.” (8) It is, consequently, apposite to re-characterize the
present query as whether the scope of consent already contained in an arbitration
agreement may, in some cases, also include related non-signatories?
Answering the aforementioned query involves an assessment of several competing
conceptual considerations. To borrow words from William W. Park, “motions to join non-
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 signatories create a tension between two principles: maintaining arbitration's consensual
nature, and maximizing an award's practical effectiveness by binding related persons.” (9)
On the one hand, an arbitral tribunal derives its jurisdiction from the consent of the
parties, as indicated in their arbitration agreement. Such arbitration agreement must also
be in writing in most jurisdictions, (10) including India. (11) Consent (in writing) is, thus, the
foundation of arbitration. (12) This implies that no arbitration proceeding can take place
absent cogent evidentiary basis demonstrating the existence of consent to arbitrate on
behalf of all the parties. This constraint is exacerbated by the fact that unlike courts, (13)
arbitral tribunals do not have the authority to enjoin a non-consenting party to the
proceedings before it.
Such sturdy emphasis on consent has triggered a belief that “for a third party […] to be
P 599 joined to existing arbitral proceedings against its wishes, or for a claimant to find itself in
P 600 an arbitration with a third party that the respondent has joined in” will be at odds with
the consensual nature of arbitration. (14) For instance, Karim Abou Youssef worries that to
accommodate the complex arrangements of international commerce, both national courts
and arbitral tribunals have ventured “beyond the arbitration system's final frontier and
logical limit: consent.” (15) As such, he cautions that “decision-makers should not forget
that consent remains, and is likely to remain, the default rule in assessing jurisdiction,
even though practice permits the usage of a number of approaches, criteria and norms
that are less or even non-consensual.” (16) This specific view, premised on the infallibility
of consent, constitutes one end of the jurisprudential paradigm.
On the other hand, there are good reasons to not interpret the consent requirement in
arbitration in a restricted manner in order to deprive non-signatories the benefit of an
arbitration agreement. Stavros Brekoulakis puts forth a principled theoretical premise
justifying the participation of non-signatory third parties in the arbitration process. He
identifies that there may be instances “where the group of parties bound by the same
substantive rights and duties […] is wider than the group of parties bound by the
arbitration agreement.” (17) In such cases, it falls upon national procedural systems to
sustain “a functional equilibrium between the substantive and the procedural aspect of a
dispute”; (18) the reasons being three-fold.
Firstly, the object of any dispute resolution mechanism agreed by the contracting parties is
to enforce the substantive rights and duties that they have contracted for. Consequently,
where these rights and duties implicate certain related entities, which are not signatories
to the contract per se, it “is only logical that the procedural arrangements will have to
P 600 follow and adjust to the substantive arrangements of the parties.” (19) If not, the dispute
P 601 resolution mechanism agreed between the parties, including an agreement to arbitrate,
will be rendered ineffective. And this could not have been the intention of any reasonable
person. After all, a rational contracting party would not have intended to include a
stipulation that ultimately has little legal significance. (20)
Secondly, it is central to “the success of any legal system, code or set of rules [that] it
reflects and caters for the realities of its time.” (21) This caveat also applies to both
domestic and international commercial arbitration. There are reasons to believe that
“commercial arbitration had its beginning with the practices of the market and fair courts
and in the merchant gilds” (22) and that it played an important role in commercial matters
across different ages of time. (23) Yet, arbitration continued to remain characterized as “a
matter of free decision, each case being viewed in the light of practical expediency and
decided in accord with the […] economic norms of some particular group.” (24) Thus,
notions fundamental to arbitration law, by their very nature, must “be reviewed and, if
necessary, revised in order to ensure that they can be applied without difficulty in the
context of the types of disputes which arise in today's commercial world.” (25) This also
includes the concept of consent. (26)
P 601 Thirdly, adapting the contemporary understanding of consent to include non-signatory
P 602 entities also promotes procedural efficiency by mitigating overlapping judicial
proceedings involving what effectively is the same dispute. When viewed from this
perspective, “there are obvious advantages to having those disputes resolved in a single
forum where common issues of fact and/or law can be addressed by the same panel in one
proceeding.” (27)
This appears to be the position in the USA as well. Where a party has agreed to arbitrate
with any entity, US courts have been willing to expand that agreement to embrace others.
(28) In doing so, the requirement that the arbitration agreement be in writing seldom poses
a hurdle. Even though the New York Convention and arbitral legislations mention this
formal constraint, it does not mean the written agreement must also be signed. (29) But
how do Indian courts perceive this requirement?

3 The Judicial Pendulum in India

As mentioned above, Indian courts' response to questions involving the effect of an
arbitration agreement on non-signatories in a composite economic transaction has swung
from one end of the jurisprudential paradigm to the other. They have oscillated from a
position of initial reluctance to embrace non-signatories to interpreting the consent
requirement in a liberal manner.

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 3.1 The Initial Reluctance
India's initial resentment towards non-signatories is best exemplified by the Supreme
Court of India's judgment in Indowind Energy Limited v Wescare (I) Limited and another. (30)
Wescare (the first respondent) was engaged in the business of setting up/ managing
windfarms and generating power by using Wind Electric Generators. On 24 February 2006, it
entered into an agreement of sale with Subuthi Finance Limited (the second respondent),
which was the promoter of Indowind Energy (the appellant). Clause 10 of this agreement
P 602 provided recourse to arbitration in case of a dispute concerning any matter either covered
P 603 by or touching upon the agreement. Upon occurrence of certain disputes, Wesacre filed
an application for appointment of an arbitrator under Section 11(6) of the Arbitration and
Conciliation Act 1996 (‘Indian Arbitration Act’), as it existed then. It arrayed both Subuthi
Finance as well as Indowind Energy as the parties to the dispute.
In the first instance, the Chief Justice of the High Court of Madras, before whom the
application was listed, appointed a sole arbitrator on the grounds that Indowind was prima
facie a party to the arbitration agreement and hence, bound by it. It reasoned that
considering the relationship between Subuthi Finance and Indowind Energy, and the fact
that the two entities had a common registered office as well as common directors, it was
clear that the two entities were in fact one and the same. (31) And since the signature of a
party was not a formal requirement of an arbitration agreement under Section 7 of the
Indian Arbitration Act, Indowind was a party the agreement of sale even if it did not sign it.
(32) In appeal, however, the Supreme Court questioned whether an arbitration clause
found in an agreement between two parties, could be considered to bind a person who did
not sign it? (33)
Answering this question in the negative, the Supreme Court emphasized that in the
absence of any document signed by Wescare and Indowind, or any contract that
incorporated an arbitration agreement by reference, Indowind was not party to the
arbitration clause invoked. This was evident to it “from a plain, simple and normal reading
of Section 7.” (34) The Court further noted that Subuthi and Indowind were two
independently incorporated companies, with distinct legal identities. The “mere fact that
two companies have common shareholders or common Board of Directors, will not make
[them] a single entity. Nor will [it] lead to an inference that one company will be bound by
the acts of the other.” (35) The Court also rejected Wesacre's insistence that it should
consider the conduct of Indowind in relation to the transaction in order to infer that it was
effectively a party to the arbitration agreement. Instead, it explicitly clarified that “an
arbitration agreement is different from a contract. […] If Section 7 [of the Indian Arbitration
Act] says that an arbitration agreement should be in writing, it will not be sufficient for the
P 603 petitioner […] to show that […] Indowind had transacted with Wescare, or Wescare had
P 604 performed certain acts with reference to Indowind, as proof of arbitration agreement.”
(36) This remained the governing principle in India until 2012.

3.2 The Tide Has Turned

India's watershed moment arrived in 2012, in the form of Supreme Court of India's
judgment in Chloro Controls (I) P Ltd v Severn Trent Water Purification Inc and others. (37)
The factual matrix of the case involved a convoluted web of seven agreements between
five entities. (38)
On the appellant's side, Chloro Controls (the appellant) was a company engaged in the
business of manufacturing chlorination equipment. It was incorporated in India by one
Madhusudan Kocha (the ninth respondent) and his group, i.e. the Kocha Group. On the
respondents' side, until 2002, Severn Trent Water Purification Inc. (the first respondent)
was known as Capital Control Co. Inc. It was wholly owned by Severn Trent Services PLC, UK,
which had purchased its shareholding from Severn Trent Services (Delaware) Inc., USA
between 1990 and 1994. In 2003, Severn Trent Water Purification Inc. merged with Capital
Control (Delaware) Co. Inc. (the second respondent).
In 1995, Capital Controls (India) Private Ltd. (the fifth respondent) was incorporated in India
pursuant to joint venture agreements executed between the appellant and the ninth
respondent on the one hand, and the first and second respondents on the other.
In 1998, Severn Trent Services (Delaware) Inc. USA, the erstwhile parent company of the
first respondent, acquired one Excel Technologies International Corporation, which was
engaged in the manufacture of certain chlorination products. Subsequently, Excel
Technologies executed a joint venture agreement with one De Nora North America Inc. In
2001, it floated a further joint venture company, Severn Trent De Nora LLC, for dealing in
the chlorinated products that it manufactured. One of these products originally
manufactured by the parent company of De Nora North America Inc., was, however, dealt
with and distributed by Titanor Components Ltd. (the third respondent). Severn Trent De
Nora LLC gave independent distribution rights for India with respect to all of its products
to Hi Point Services Pvt. Ltd. (the fourth respondent).
P 604
P 605
The common purpose of these joint venture agreements was to inter alia design,
manufacture, import, export, and market gas and electro-chlorination equipment. It was in
this context that two sets of disputes arose between (i) Chloro Controls and the Kocha

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 Group; and (ii) Severn Trent Water Purification Inc., Capital Control (Delaware) Co. Inc. and
Capital Control Co. Inc.
In relation to these disputes, Chloro Controls filed a derivative suit in India, seeking inter
alia declaratory reliefs concerning the validity and scope of the above joint venture
agreements. It was in this proceeding that Severn Trent Water Purification Inc. filed an
application seeking a reference of the entire dispute to arbitration under Section 45 of the
Indian Arbitration Act, which is premised on Article II(3) of the New York Convention. After
several rounds of litigation, when a Division Bench of the High Court of Bombay, on 4 March
2010, referred the entire dispute to arbitration, (39) the matter finally reached before the
Supreme Court of India in appeal. And one of the questions framed by the Court was that,
in a situation where (i) multiple agreements are signed between different parties, (ii) some
contain an arbitration clause and others do not, and (iii) the parties are not identical in
civil proceedings before the court and the arbitration agreement, whether a reference of
disputes as a whole or in part can be made to the arbitral tribunal? (40)
The Court answered this question by reference to the particular language of Section 45 of
the Indian Arbitration Act. Section 45 prescribes that “a judicial authority, when seized of
an action in a matter in respect of which the parties have made [an arbitration agreement]
shall, at the request of one of the parties or any person claiming through or under him, refer
the parties to arbitration, unless it finds that the agreement is null and void, inoperative or
incapable of being performed.” (41) Relying on this provision, it explained that in relation
to arbitrations not governed by Part I of the Indian Arbitration Act, Section 45 allows not
just the disputing party, but “any person claiming through or under” the said party to seek
a reference to arbitration. And if “the words used by the Legislature are of wider
connotation or the very language of section is structured with liberal protection, then such
provision should normally be construed liberally.” (42)
In stark contrast to the position in Indowind, the Court then held that while arbitration
P 605 normally takes place between persons who are parties to both the arbitration agreement
P 606 and the underlying substantive contract, it need not always be the case. Such a
situation, although difficult, “are not absolute obstructions to law/the arbitration
agreement. Arbitration, thus, could be possible between a signatory to an arbitration
agreement and a third party.” (43) However, considering the significance of this holding,
the Court also laid down the following five caveats:
(i) The “intention of the parties” is a significant feature, which must be established
before the scope of the arbitration agreement can be said to include any non-
signatory party. (44) A concerned court must examine each request for reference to
arbitration with “greater caution and by definite reference to the language of the
contract.” (45)
(ii) While non-signatories can be subjected to arbitration, this can only occur in
exceptional cases. (46) Such exceptional situations can be identified on the basis of
factors such as the directness of the relationship to the signatory party and
commonality of subject-matter. Particularly, “[w]here the agreements are
consequential and in the nature of a follow-up to the principal or mother agreement
[…] and […] so intrinsically intermingled or inter-dependent that it is their composite
performance which shall discharge the parties of their respective mutual obligations
[…] this would be a sufficient indicator of intent of the parties to refer signatory as
well as non-signatory parties to arbitration.” (47)
(iii) In composite economic transactions, it may be permissible to construe the
arbitration agreement with the aid of incorporation by reference. But the answer to
this question should be case-specific, taking into account the specific industry
usages. (48)
(iv) Heavy onus lies on the party seeking the reference to arbitration to show that, in fact
as well as in law, it is claiming ‘through’ or ‘under’ the signatory party. (49)
P 606 (v) The courts should examine whether a composite reference of both non-signatories
P 607 and signatories to arbitration would serve the ends of justice. It is only in such
cases will a reference of non-signatories to arbitration be permissible. (50)
Applying this criteria, the Court finally held that the respective corporate structures of the
respondent and the appellant groups showed that the “joint venture project was not
dependent on any single agreement but was capable of being achieved only upon
fulfillment of all these agreements.” (51) On such basis, it affirmed the reference to
arbitration made by the High Court of Bombay.

3.3 The Confusing Aftermath

The judgment in Chloro Controls paved the way for non-signatories to play a prominent role
in the arbitral process. However, considering the factual nature of the inquiry to be made
in each case, the application of the principles laid down by the Supreme Court of India
produced conflicting results. Two such instances are noteworthy.
Firstly, in Purple Medical Solution Private Limited v MIV Therapeutics Inc. and others, (52) the
petitioner entered into a Share Purchase Agreement and License Royalty Agreement with
the first respondent, a Canadian company. Both agreements contained an identical

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 arbitration clause. The second respondent signed both the agreements on behalf of the
first respondent, in his capacity as the latter's Chairman of the Board of Directors, CEO, CFO
as well as Treasurer. It subsequently emerged that during contract negotiations, the
respondents had made several misrepresentations. Consequently, the petitioner issued a
notice of arbitration against both the respondents. And when neither respondent
nominated an arbitrator on their behalf, the petitioner filed an application under Section
11(6) of the Indian Arbitration Act before Justice Gogoi of the Supreme Court of India, to
appoint an arbitrator. It argued that the second respondent was an alter-ego of the first
respondent, and thus, bound by the arbitration clause invoked. (53)
Relying on the aforementioned principles, Justice Gogoi agreed and held that the
“involvement of the second Respondent and the decision of this Court in Chloro Controls
India Private Limited […] would justify appointment of an arbitrator on behalf of both the
Respondents.” (54)
P 607
P 608
However, Justice Gogoi's conclusion must be juxtaposed against the High Court of Delhi's
judgment in Sudhir Gopi v Indira Gandhi National Open University and others, (55) which
seemingly arrived at a finding to the contrary in somewhat similar circumstances.
In Sudhir Gopi, the first respondent, a statutory University in India, entered into an
agreement with Universal Empire Institute of Technology (UEIT), a company incorporated
in Dubai, UAE, for providing certain educational programs on collaborative basis. The
agreement was signed on behalf of UEIT by the petitioner, who was its Chairman and
Managing Director. Upon occurrence of certain disputes, the first respondent terminated
its agreements with UEIT. It also invoked the arbitration agreement contained in the
aforementioned agreement to initiate proceedings against both UEIT and the petitioner. In
these arbitral proceedings, the Tribunal rejected the Petitioner's objection that it was not
party to the arbitration clause and awarded damages to the first respondent. The
petitioner challenged this award before the High Court of Delhi on the ground that it was
without jurisdiction to the extent that it held the petitioner to be liable for the damages
awarded.
Contrary to the approach adopted Justice Gogoi, the High Court observed that the
agreement in question was not signed by the Petitioner in his personal capacity, (56) so as
to reflect his consent to arbitration. This being the case, since an arbitral tribunal's
jurisdiction is consensual, it cannot be used to bring within its ambit, persons that are
outside the circle of consent. This implies that “an arbitrator would not have the power to
pierce the corporate veil so as to bind other parties who have not agreed to arbitrate”; (57)
rendering its decision questionable.
Even otherwise, the Court noted that the solitary reason for the arbitral tribunal to hold
that the petitioner was party to the arbitration clause invoked was that he held almost
entire shares of UEIT, and exercised absolute control over its affairs. (58) However, it
confirmed that the mere “fact that an individual or a few individuals hold controlling
interest in a company and are in-charge of running its business does not ipso jure render
them personally bound by all agreements entered into by the company.” (59) Thus, in
finding the petitioner to be party to the arbitration agreement in question, the tribunal
P 608 had disregarded “the corporate personality of UEIT [which] is clearly impermissible and
P 609 militates against the law settled since the nineteenth century.” (60) The Court accepted
that corporate veil can be pierced in rare cases, where the conduct of a “shareholder is
abusive and the corporate facade is used for an improper purpose, for perpetuating a
fraud, or for circumventing a statute.” (61) But since no such circumstance existed in the
present case, mere “failure of a corporate entity to meet its contractual obligations is no
ground for piercing the corporate veil.” (62)
Secondly, another contradiction arose with reference to the application of the Chloro
Controls judgment, rendered in the context of Section 45 contained in Part II of the Indian
Arbitration Act, to cases governed by Part I of the enactment. This is significant since until
2015, while Section 45 allowed “any person claiming through or under” the party to an
arbitration agreement to seek a reference to arbitration, no corresponding language was
present in Section 8 in Part I.
In 2013, the High Court of Bombay addressed this very question in Housing Development
and Infrastructure Limited v Mumbai International Airport Private Limited and others. (63)
There, the petitioner and the first respondent entered into a Slum Rehabilitation Contract
in 2007, which also contained an arbitration clause. However, in 2013, the first respondent
terminated this contract on account of alleged contractual breaches on part of the
petitioner. Perturbed by the termination, the Petitioner invoked the aforementioned
arbitration clause, and filed an application under Section 9 of the Indian Arbitration Act to
seek interim measures of protection against the first respondent as well as certain other
entities not signatory to the contract in question. It cited the Supreme Court's judgment in
Chloro Controls in support.
However, the High Court rejected the petitioner's reliance on Chloro Controls, stating that
the judgment only highlights the possibility to consolidate multiple arbitral claims. This
was different from asserting “that a party is entitled, as a matter of right, and in an action
under Part I of the Arbitration Act, to drag into arbitration another party with whom he has

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 no contractual privity.” (64) The Court also found the petitioner's argument that if
“following Chloro Controls, strangers can be brought to arbitration under Section 45, there
P 609 is no logical reason why this should not apply to Section 8”, to be fallacious. (65) It thus
P 610 concluded that: “Section 45 speaks of the request for reference to arbitration emanating
from one of the parties “or any person claiming through or under him”. Section 8 does not.
Chloro Controls read these words in Section 45 to have wide amplitude. We do not believe
that it sought to introduce these words into Section 8, which does not have them.” (66)
Notwithstanding such clear distinction, a year later, the High Court of Rajasthan arrived at
a completely contrary conclusion in Jitender Singh and others v Viyom Networks Limited.
(67) There, the respondent entered into a lease agreement with the first and second
petitioners for installation, modification and maintenance of telecommunication services
equipment. This agreement contained an arbitration clause. Upon the occurrence of
certain disputes, the respondent filed a civil suit against the two petitioners that were
party to the lease agreement, and the third petitioner, for seeking a permanent injunction
against all three of them. The three petitioners, on the other hand, relied on the arbitration
clause contained in the lease agreement to seek a reference to arbitration under Section 8
of the Indian Arbitration Act. The respondent opposed this on the ground that the third
petitioner was not signatory to the arbitration clause invoked.
Despite the difference in the wording of Sections 8 and 45, the High Court of Rajasthan
cited the Chloro Controls judgment to observe that “even non-signatory parties to the
agreement can be referred to the arbitrator, on the basis of the implied or specific consent
of the said party or by judicial determination.” (68) Accordingly, it rejected the
respondent's reservations and held that as the third petitioner, although not signatory to
the lease agreement containing the arbitration clause, had consented to arbitrate at this
belated stage, there was no impediment in referring all the parties to arbitration. (69) In
other words, contrary to the reasoning put forth by the High Court of Bombay, the High
Court of Rajasthan applied the principles laid down in Chloro Contols to arbitrations
governed by Part I of the Indian Arbitration Act as well.
That being said, Indian courts continued to adapt their approach towards non-signatories,
even if inconsistently. (70) As recently as 2017, the High Court of Delhi in GMR Energy Limited
P 610 v Doosan Power Systems India Private Limited and others (71) continued this trend. The Court
P 611 was dealing with a dispute emanating from a web of (i) three EPC agreements between
GMR Energy Limited, Dossan Power Systems India Private Limited (‘Doosan India’) and GMR
Chhattisgarh Energy Limited (‘GCEL’); (ii) a Corporate Guarantee between GMR
Infrastructure Limited, GCEL and Doosan India; and (iii) two Memorandum of
Understandings between GMR Energy Limited and Doosan India. However, despite the lack
of commonality of parties in these agreements, it relied on the Chloro Control judgment to
pierce the corporate veil. The Court noted the inter-corporate relationships between the
above entities and the proximity between each agreement, and referred all parties before
it to the arbitration proceedings already commenced. (72)
The above iteration reveals two things. On the one hand, it demonstrates a gradual shift in
the Indian courts' approach towards non-signatories. Their initial reluctance has made way
for a more flexible understanding of the notion of consent, led by the Supreme Court's
judgement in Chloro Controls. On the other hand, there nonetheless remains some
inconsistency in applying the various principles expounded in Chloro Controls. Indian
courts continue to struggle to distinguish the circumstances where it may be appropriate
to hold non-signatories bound by an arbitration agreement from those where it may not.
(73) Viewed from this perspective, there was a visible need for the Supreme Court to
provide further clarity on this issue. And this need appears to have been fulfilled in 2018.

3.4 A Significant Clarification

In 2018, the Supreme Court of India was once again tasked with clarifying the approach to
be adopted towards non-signatories to an arbitration agreement; this time in Rishabh
Enterprises. (74) Rishabh Enterprises (the first respondent) was the sole proprietorship
concern of Dr. Abhishek Singhvi (the second respondent). On 1 February 2012, it entered
into two agreements with Juwi India Renewable Energies Private Limited (‘Juwi India’),
namely (i) Equipment and Material Supply (‘EMS’) contract for purchase of some power
generating equipment; and (ii) Engineering, Installation and Commissioning (‘EIC’) contract
P 611 for installation and commissioning of the Solar Plant at Jhansi, Uttar Pradesh, India. Both
P 612 agreements contained an arbitration clause. Thereafter, on 5 March 2012, Rishabh
Enterprises entered into a Sale and Purchase Agreement (‘SPA’) with Astonfield
Renewables Private Limited (the second appellant) for purchasing CIS Photovoltaic
products. This SPA did not contain any arbitration clause. The CIS Photovoltaic products
were to be leased to Dante Energy Private Limited (the third appellant) in accordance with
an Equipment Lease Agreement (‘ELA’) dated 14 March 2012 between the two companies.
Certain disputes arose when the two respondents alleged that Dante Energy had defaulted
in payment of rent due to Rishabh Enterprises under the ELA, and that Astonfield had also
committed fraud by inducing Rishabh Enterprises to purchase its CIS Photovoltaic
products. In such situation, on the one hand, Dante Energy issued a notice dated 13
February 2016 and invoked the arbitration clause in the ELA. On the other hand, on 11
March 2016, the respondents preferred a civil suit before the High Court of Delhi against all
the appellants, where they made allegations of fraud and misrepresentation. They inter

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 alia sought a declaration that the EMS and EIC Contracts, as well as the ELA dated 14 March
2012, were vitiated by serious fraud committed by appellants. In such proceedings, the
appellants filed an application under Section 8 of the Indian Arbitration Act, requesting
that the entire dispute be referred to arbitration.
To resolve this conundrum, the Supreme Court inter alia questioned whether “all the four
agreements [were] interconnected to refer the parties to arbitration, though there is no
arbitration clause in the Sale and Purchase Agreement […] between Rishabh and
Astonfield?” (75)
The Court began by conducting an inquiry into the relationship between the four
agreements. It clarified that they were all executed in relation to the commissioning of the
same Solar Plant in Uttar Pradesh, with the ELA being the principal or main agreement. (76)
Further, both EMS and EIC contracts were in fact “ancillary agreements which led to the
main purpose of commissioning the Photovoltaic Solar Plant […] by Dante Energy […] Even
though, the [SPA] between Rishabh and Astonfield does not contain arbitration clause, it is
integrally connected with the commissioning of the Solar Plant […] by Dante Energy.” (77)
Intriguingly, the Court did not find it relevant that Juwi India was not party to the civil
proceedings before the High Court of Delhi, or that neither Astonfield nor Ameet Lalchand
(the first appellant) were signatories to the ELA. (78) Ultimately, it remained “a commercial
P 612 transaction integrally connected with commissioning of Photovoltaic Solar Plant at
P 613 [Uttar Pradesh].” (79) Thus, it concluded that all “the four agreements are interconnected
[…] several parties are involved in a single commercial project […] executed through
several agreements/ contracts. In such a case, all the parties can be covered by the
arbitration clause in the main agreement.” (80)
However, the Court's reasoning did not end there. It went on to observe that in 2015,
Section 8 was amended to bring it in line with Section 45 of the Indian Arbitration Act. (81)
The amended Section 8(1) now prescribes that a “judicial authority, before which an action
is brought in a matter which is the subject of an arbitration agreement shall, if a party to
the arbitration agreement or any person claiming through or under him, so applies […] then,
notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the
parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
(82) Today, both Sections 8 and 45 permit a party to the arbitration agreement or “any
person claiming through or under” it to seek reference to arbitration.
Taking note of this alteration, the Supreme Court found the High Court of Delhi's
observation that “there is no arbitration agreement between Astonfield and Rishabh
[Enterprises]” incorrect. It then applied the principles laid down in Chloro Controls to set
aside the impugned judgment of the High Court of Delhi, and referred the entirety of
dispute arising from the four agreements and the parties to these agreements to
arbitration. (83) It remains unclear whether the Court did refer Juwi India to arbitration
since it was not a party to the proceedings before it. Nonetheless, for now, this remains a
binding guiding principle for Indian courts to follow.

4 Conclusion
India's tryst with non-signatories to an arbitration agreement in relation to composite
economic transactions is an exhausting tale of caution and adventure. It is a tale of
adventure for it represents the ability of the country's Supreme Court to revisit its
understanding of certain fundamental concepts of arbitration law, and bring it in sync with
P 613 the commercial realities of time. At the same time, it is a tale of caution for the factual
P 614 inquiry that the courts are expected to conduct in deciding whether to bind a non-
signatory entity to an arbitration agreement is filled with deceptive convolutions.
In this light, one can draw a few conclusions with certainty. One, it is clear that the
principles prescribed by the Supreme Court in Chloro Controls apply in relation to
arbitration proceedings governed by both Parts I and II of the Indian Arbitration Act. Two,
notwithstanding the adoption of a liberal judicial attitude towards non-signatories, the
primary emphasis continues to remain on the existence of consent on part of all the
parties to the dispute. The only change is with respect to the evidentiary basis required to
ascertain this particular fact. And while it is certainly difficult to prove consent in the
absence of signatures, “that is a question of proof, not of principle.” (84)
Harshad PATHAK, India's Tryst with Non-Signatories to an Arbitration Agreement in Composite
Economic Transactions
Summary
Indian courts have dealt with issues relating to the effect of an arbitration agreement on
related non-signatory entities in a plethora of circumstances. And like a pendulum, their
response has swung from one end of the jurisprudential paradigm to the other. While
initially reluctant to bind non-signatory entities to an arbitration agreement as a matter of
principle, they now adopt a pragmatic approach. Today, they are inclined to venture
beyond the formal constraints of an arbitration agreement in writing, and identify entities
that may have tacitly consented to arbitrate despite not signing the agreement. Against
the backdrop of a conceptual discussion surrounding the issue, the paper maps this
particular journey undertaken by Indian courts over the past decade. It keeps a close eye
on the inconsistent application of the principles expounded by the Supreme Court of India

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 in its seminal judgment in Chloro Controls v Severn Trent Water Purification Inc.; resulting in
some confusion. In this light, the paper examines why the Supreme Court of India's latest
exposition on this issue in its judgment in Rishabh Enterprises attains significance.
Accordingly, while it is inevitable that Indian courts will continue to struggle to distinguish
the circumstances in which they may bind non-signatories to an arbitration agreement
from those where they may not, for now, there are more signs of clarity than concern.
P 614

References
1) Harshad Pathak: Senior Associate, P&A Law Offices, New Delhi. The contents of this
article reflect the personal views of the author alone and not necessarily of P&A Law
Offices. The author may be contacted at harshad.pathak@mids.ch.
1) Ameet Lalchand Shah and Ors v Rishabh Enterprises and another, Civil Appeal No. 4690
of 2018 (SC).
2) William W. Park, ‘Non-Signatories and International Contracts: An Arbitrator's Dilemma’
in Multiple Party Actions in International Arbitration 3 (Permanent Court of Arbitration,
2009), p. 6.
3) Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-Issue and
Class Actions (Kluwer Law International, 2006), p. 8 (“Persons other than the formal
signatories may be parties to the arbitration agreement by application of the theory of
apparent mandate or ostensible authority or because they are third-party
beneficiaries, or assignees of the contract containing the clause or members with the
signatories of a general partnership or a community of rights and duties.”).
4) Dow Chemicals & Others v. Isover Saint Gobain, ICC Case No. 4131 of 1982.
5) Yves Derains, ‘Is there A Group of Companies Doctrine? ’ in Bernard Hanotiau and Eric
Schwartz (eds), Multiparty Arbitration, Dossiers of the ICC Institute of World Business
Law, vol. 7 (Kluwer Law International; International Chamber of Commerce (ICC), 2010),
p. 132.
6) James Hosking, ‘Non-Signatories and International Arbitration in the United States: the
Quest for Consent’, (2004) 20(3) Arbitration Int'l 289, p. 289.
7) See John Savage and Tan Ai Leen, ‘Family Ties: When Arbitration Agreements Bind Non-
Signatory Affiliate Companies’, (2003) 2 Asian Dispute Rev. 16.
8) Bernard Hanotiau, ‘Problems Raised by Complex Arbitrations Involving Multiple
Contracts-Parties-Issues An Analysis’, (2001) 18(3) Journal of Int'l Arbitration 253, p. 255.
9) William W. Park [FN 2], p. 3.
10) Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York,
1958), art II(1)-(2); Model Law on International Commercial Arbitration of the United
Nations Commission on International Trade Law, G.A. Res. 40/72, U.N. Doc. A/RES/40/72
(11 December 1985), art 7(2).
11) Arbitration and Conciliation Act 1996 (India), s 7(3)-(4).
12) Bernard Hanotiau (2006) [FN 3], p. 32.
13) See The Code of Civil Procedure 1908, Order 1 Rule 10 (2); Mumbai International Airport
Private Limited v Regency Convention Centre and Hotels Private Limited and others,
(2010) 7 SCC 417, para. 8.
14) Richard Bamforth and Katerina Maidment, ‘“All join in” or not? How well does
international arbitration cater for disputes involving multiple parties or related
claims? ’, (2009) 27(1) ASA Bulletin 3, p. 5. See also Peterson Farms Inc. v C&M Farming
Ltd., (2004) EWHC 121; Johannes Landbrecht and Andreas R. Wehowsky, ‘Determining
the Law Applicable to the Personal Scope of Arbitration Agreements and its
“Extension”’, (2017) 35(4) ASA Bulletin 837, p. 847 (for the position under Swiss law); Yves
Derains [FN 5] (for the position under French law).
15) Karim Abou Youssef, ‘The Limits of Consent: The Right or Obligation to Arbitrate of Non-
Signatories in Groups of Companies’ in Bernard Hanotiau and Eric Schwartz (eds),
Multiparty Arbitration, Dossiers of the ICC Institute of World Business Law, vol. 7 (Kluwer
Law International; International Chamber of Commerce (ICC), 2010), p. 100.
16) ibid, p. 103.
17) Stavros Brekoulakis, ‘The Relevance of the Interests of Third Parties in Arbitration:
Taking a Closer Look at the Elephant in the Room’, (2009) 113(4) Penn State L. Rev. 1165,
p. 1179.
18) ibid, p. 1183.
19) ibid.
20) Premium Nafta Products Limited and others v Fili Shipping Company Limited and others,
(2007) UKHL 40, ¶13 (“… the construction of an arbitration clause should start from the
assumption that the parties, as rational businessmen, are likely to have intended any
dispute arising out of the relationship into which they have entered or purported to
enter to be decided by the same tribunal.”).
21) Bamforth and Maidment [FN 14], p. 3.
22) Earl S Wolaver, ‘The Historical Background of Commercial Arbitration’, (1934) 83 U. Pa.
L. Rev. 132, p. 133.
23) See generally Gary B. Born, International Commercial Arbitration, 2nd ed. (Kluwer Law
International, 2014), pp. 6-70.

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 24) Earl S Wolaver [FN 22], p. 132. See Mitsubishi Motors Corp. v Soler Chrysler-Plymouth Inc.
473 U.S. 614 (1985) (“… sensitivity to the need of international commercial system for
predictability in the resolution of disputes […] require[s] enforcement of the
arbitration clause […] even assuming that a contrary result would be forthcoming in a
domestic context.”).
25) Bamforth and Maidment [FN 14], p. 3. See also James Hosking [FN 6], p. 294.
26) Bernard Hanotiau, ‘Consent to Arbitration: Do We Share a Common Vision?’, (2011) 27(4)
Arbitration Int'l 539, p. 554 (“The constituents of consent in the various jurisdictions
have not fundamentally changed. They have only been adapted in their application to
new and more complex factual situations, to modern multiparty business transactions
[…] it is more accurate to refer to a modern approach to consent; an approach that is
more pragmatic, more focussed [sic] on an analysis of facts, which places more
emphasis on commercial practice, economic reality, trade usages, and the complex
and multifaceted dimensions of large projects involving groups of companies and
connected agreements in multiparty multi-contract scenarios…”)
27) Bamforth and Maidment [FN 14], p. 4.
28) John M. Townsend, ‘Non-signatories in International Arbitration: An American
Perspective’ in Albert Jan van den Berg (ed), International Arbitration 2006: Back to
Basics?, ICCA Congress Series, vol. 13 (Kluwer Law International, 2007), p. 365.
29) Carolyn B. Lamm and Jocelyn A. Aqua, ‘Defining the Party - Who Is a Proper Party in an
International Arbitration before the American Arbitration Association and other
International Institutions’, (2003) 34 George Washington Int'l L. Rev. 711, p. 719 (citing
Interocean Shipping Co. v Nat'l Shipping and Trading Corp., 523 F.2d 527, 539 (2d Cir. 1975)
and Alamria v Telcor Int'l, Inc., 920 F. Supp. 658, 669 (D. Md. 1996)).
30) Indowind Energy Limited v Wescare (I) Ltd. and another, (2010) 5 SCC 306.
31) ibid, para. 8(b).
32) ibid, para. 8(f).
33) ibid, para. 9.
34) ibid, para. 13.
35) ibid, para. 15.
36) ibid.
37) Chloro Controls (I) P Ltd v Severn Trent Water Purification Inc. and others, (2013) 1 SCC
641.
38) ibid, para. 11 - Table.
39) ibid, para. 48.
40) ibid, para. 2(3).
41) Arbitration and Conciliation Act 1996 (India), s 45.
42) Chloro Controls [FN 36], para. 90.
43) ibid, para. 65.
44) ibid, para. 67.
45) ibid, para. 71.
46) ibid, para. 168.
47) ibid, para. 71.
48) ibid, para. 72.
49) ibid, paras. 65, 96.
50) ibid, para. 68.
51) ibid, para. 105.
52) Purple Medical Solutions Private Limited v MIV Therapeutics Inc. and others, (2015) 15
SCC 622.
53) ibid, para. 9.
54) ibid, para. 11.
55) Sudhir Gopi v Indira Gandhi National Open University and others, 2017 (164) DRJ 227.
56) ibid, para. 13.
57) ibid, para. 15.
58) ibid, para. 32.
59) ibid, para. 33.
60) ibid, para. 34.
61) ibid, para. 35.
62) ibid, para. 40.
63) Housing Development and Infrastructure Limited v Mumbai International Airport Private
Limited and others, Appeal (L) No. 365 of 2013 in Arbitration Petition (L) No. 902 of 2013.
64) ibid, para. 17.
65) ibid.
66) ibid.
67) Jitender Singh and others v Viyom Networks Limited, 2014 (2) ARBLR 374 (Raj).
68) ibid, para. 8.
69) ibid, para. 9.
70) See for instance, Chatterjee Petrochem Co and others v Haldia Petrochemicals Ltd and
others, 2013 (4) ARBLR 456 (SC); HLS Asia Ltd v Geopetrol International Inc and others,
2013 IAD (Delhi) 149.
71) GMR Energy Limited v Doosan Power Systems India Private Limited and others, 2017(6)
ARBLR 447(Delhi).

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 72) ibid, para. 23-18.
73) See for instance, Duro Felguera SA v Gangavaram Port Limited, 2017 SCC Online SC 1233,
para. 40 (The Supreme Court differentiated the factual circumstances in Chloro
Controls, to hold that where multiple contracts have separate arbitration clauses,
which do not depend on the original agreement, there can be no composite reference
to arbitration.)
74) Rishabh Enterprises [FN 1].
75) ibid, para. 11.1.
76) ibid, para. 21.
77) ibid.
78) ibid.
79) ibid.
80) ibid, para. 22.
81) ibid, para. 24.
82) Arbitration and Conciliation Act 1996 (India), s 8(1).
83) Rishabh Enterprises [FN 1], para. 37.
84) Savage and Tan [FN 7], p. 18.

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