Supreme Court: The present appeal was filed against the judgment and order dated 7-4-2025 passed by the Bombay High Court, whereby application filed by the respondent-BCL Secure Premises (P) Ltd. (‘BCL’), under Section 11(4) of the Arbitration and Conciliation Act, 1996, was allowed and an arbitrator was appointed to adjudicate upon the disputes between BCL and the appellant-Hindustan Petroleum Corporation Ltd. (‘HPCL’).
The Division Bench of J.B. Pardiwala and K.V. Viswanathan*, JJ., stated that the referral court should be prima facie satisfied that there exists an arbitration agreement and as to whether the non-signatory is a veritable party. The Court opined that the referral court under Section 11 is not deprived of its jurisdiction from examining whether the non-signatory is in the real sense a party to the arbitration agreement. The Court held that BCL did not establish its case to show even prima facie, the existence of an arbitration agreement between HPCL and BCL. Further, there was nothing to establish that there was any semblance of an intent to effect legal relationship between BCL and the party originally granting the contract and/or to indicate that BCL was a veritable party. Thus, the Supreme Court set aside the judgment and order dated 7-4-2025.
Background
HPCL floated a tender for design, supply, installation, integration, testing, commissioning and post-commissioning warranty support services of Tank Truck Locking System (‘TTLS’). The tender stated that the contractor was not entitled to sublet, transfer, or assign, the work under the contract without the prior consent of the owner obtained in writing.
In 2013, HPCL issued a purchase order in favour of AGC Networks Ltd. (presently Black Box Limited), which was accepted. In 2016, HPCL issued a notice to AGC Networks regarding non-functioning of Electro Magnetic Locking System in two areas, and later in 2017, HPCL issued a show cause notice for unsatisfactory performance of EMLS. In 2018, BCL informed HPCL that they were working as sub-vendor of AGC Networks and were entitled to receive 94% of the payment due. On 25-6-2018, HPCL informed AGC Networks that since it could not complete the project successfully, and HPCL did not enter into any contract with BCL, no payments were due to it. Thereafter, a series of proceedings ensued between BCL and HPCL.
BCL issued notice dated 12-11-2024 and filed a petition dated 28-2-2025 under Section 11(4) before the High Court. The High Court, by its judgment dated 7-4-2025, allowed the application.
Analysis, Law, and Decision
The issue for consideration is “whether the High Court, on facts, was justified in referring the parties to arbitration by allowing the Section 11(4) petition filed by the respondent?”.
The Court relied on Cox and Kings Ltd. v. Sap India (P) Ltd., 1 (2024) 4 SCC 1 (‘Cox and Kings Ltd. Case’), and observed that the referral court should be prima facie satisfied that there exists an arbitration agreement and whether the non-signatory is a veritable party. In Cox and Kings Ltd. Case (supra), it was held that even if the referral court prima facie concludes that the non-signatory is a veritable party, the Arbitral Tribunal is not denuded of its jurisdiction to decide whether the non-signatory is a party to the arbitration agreement based on factual evidence and application of legal doctrine. It was also held that the Arbitral Tribunal would decide whether the non-signatory is bound or not.
The Court relied on ASF Buildtech (P) Ltd. v. Shapoorji Pallonji and Co. (P) Ltd., (2025) 9 SCC 76, wherein it was held that even if the Court holds that prima facie a party is a veritable party that will not foreclose the Arbitral Tribunal to conclude to the contrary after an intensive inquiry. The Court stated that it would not mean that where the referral court finds prima facie, a party is not a veritable party, still the matter is left to the Arbitral Tribunal as it would relegate the referral court to the status of a monotonous automation.
The Court opined that the first thing that must be shown before the referral court is whether the non-signatory is a ‘veritable party’. The Court thus referred to Illustrated Oxford Dictionary, wherein the word “veritable” means “right; rightly so called (a veritable feast)”. The Court stated that in substance, it means “truly, genuinely or fall all intended purposes”.
The Court opined that the referral court under Section 11 is not deprived of its jurisdiction from examining whether the non-signatory is in the real sense a party to the arbitration agreement, depending on the facts and circumstances of each case.
The Court relied on In Re: Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899, (2024) 6 SCC 1, wherein it was held that since the scope of referral court must be within the parameter of Section 11(6-A), the exercise carried thereon is “examination of the existence of an arbitration agreement”, and there is an obligation in the referral court to “inspect and scrutinize” the dealings, if any, between the parties.
On the aspect of determining whether a party is a veritable party or not, the Court relied on Ajay Madhusudan Patel v. Jyotindra S. Patel, (2025) 2 SCC 147, and stated that in the present case, even prima facie BCL has not been able to establish that it was a veritable party to the contract between HPCL and AGC Networks. The Court stated that HPCL has no privity at all with BCL and was not a party to the documentation between AGC Networks and BCL, as after obtaining the contract from HPCL, AGC Networks engaged BCL to supply, install, integrate, test, commission and grant warranty and post warranty support services to it.
The Court took note of Clause 4 of the contractual arrangement of 15-1-2014, which expressly proscribes the Project Manager of BCL to not make any communication with HPCL without obtaining prior written approval from AGC Networks. HPCL and BCL were operating on separate orbits, and there was no intention to bind BCL to the contract between HPCL and AGC Networks. The Court also stated that BCL did not show any consent for assignment as required under clause 3.17 of the tender document, and there was nothing to establish that there was any semblance of an intent to effect legal relationship between BCL and the party originally granting the contract and/or to indicate that BCL was a veritable party.
The Court after applying the consensual theory or the non-consensual theory, held that BCL did not establish its case to show even prima facie the existence of an arbitration agreement between HPCL and BCL. Thus, the Court allowed the appeal and set aside the judgment and order dated 7-4-2025 passed by the High Court.
[Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises (P) Ltd., 2025 SCC OnLine SC 2746, decided on 9-12-2025]
*Judgment authored by: Justice K.V. Viswanathan
Advocates who appeared in this case:
For the Appellant(s): Sanjay Kapur, AOR; Surya Prakash, Shubhra Kapur, Mahima Kapur, Mansi Kapur, Abhishek Tiwari, Anuraj Mishra, Advocates
For the Respondent(s): Anubhav, AOR; Nalin Kohli, Senior Advocate; Chirag Madan, Ravleen Sabharwal, G. Sai Krishna Kumar, Rahul Agarwal, Ronit Bose, Nimisha Menon, Ayuushman Arora, Randeep Sabharwal, Advocates
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