Arbitration agreement not necessarily non-binding on a non-signatory party- Supreme Court of India
Case Title: AJAY MADHUSUDAN PATEL & ORS. VERSUS JYOTRINDRA S. PATEL & ORS. (Arbitration Petition No. 19 of 2024, Citation: (SC) 727).
The case, stemming from a Family Arrangement Agreement, saw disputes emerge between the AMP Group and the JRS and SRG Groups from 2013-2019, leading to multiple legal actions. Despite mediation, the groups couldn’t agree on a Sole Arbitrator, prompting a petition from the AMP Group.
Highlighting the involvement of the SRG Group, not a signatory to the FAA, the petitioner argued that SRG’s active participation in negotiations and discussions on FAA implementation made it a party to the arbitration agreement.
The court acknowledged the common subject matter and transactions, deeming SRG a liable party for arbitration. This decision sheds light on the nuances of arbitration agreements involving non-signatory parties, setting a significant precedent in Indian arbitration law.
Sequitur by the Court:
👉On facts of the case at hand, the Court was of the view that the requirement of prima facie existence of an arbitration agreement was satisfied, as both the respondent Groups did not question or deny the existence of the arbitration agreement.
👉The only issue was whether the SRG Group could be a part of the arbitration proceedings.
👉So far as the second aspect, i.e. whether the SRG Group could also be referred to arbitration, the Court opined that entities which have not formally signed the arbitration agreement may also intend to be bound by it.
👉 One of the factors relevant to decipher intent of such an entity is its participation in the performance of the underlying contract.
👉The conduct of the non-signatory party along with the other attending circumstances may lead the referral court to draw a legitimate inference that it is a veritable party to the arbitration agreement.
👉The Court concluded that it would be appropriate for the arbitral tribunal to take a call on the question whether the SRG Group is a veritable party to the arbitration agreement, after taking into consideration the evidence that may be adduced.
👉The petition was allowed and former Chief Justice of Rajasthan HighCourt Akil Kureshi appointed as the Sole Arbitrator.
#SupremeCourt #Arbitration #LegalNews
This website has been designed only for the purposes of dissemination of basic information on ADROIT; information which is otherwise available on the internet, various public platforms and social media. Careful attention has been given to ensure that the information provided herein is accurate and up-to-date.
This website is not an attempt to advertise or solicit clients and does not seek to create or invite any lawyer-client relationship. The links provided on this website are to facilitate access to basic information on ADROIT, and, to share the various thought leadership initiatives undertaken by it. The content herein or on such links should not be construed as a legal reference or legal advice. Readers are advised not to act on any information contained herein or on the links and should refer to legal counsels and experts in their respective jurisdictions for further information and to determine its impact.
