{"id":330644,"date":"2024-09-12T11:00:07","date_gmt":"2024-09-12T05:30:07","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=330644"},"modified":"2024-09-12T11:07:09","modified_gmt":"2024-09-12T05:37:09","slug":"impleading-international-non-signatories-to-domestic-arbitration-analysing-practical-implications","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/09\/12\/impleading-international-non-signatories-to-domestic-arbitration-analysing-practical-implications\/","title":{"rendered":"Impleading International Non-Signatories to a Domestic Arbitration: Analysing the Practical Implications"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><span style=\"color: #903; float: left; font-family: Georgia; font-size: 75px; line-height: 60px; padding-top: 4px; padding-right: 8px; padding-left: 3px;\">A<\/span> Constitution Bench of the Supreme Court of India in its decision in <span style=\"font-style: italic;\">Cox and Kings Ltd.<\/span> v. <span style=\"font-style: italic;\">SAP India (P) Ltd.<\/span><a id=\"fnref1\" href=\"#fn1\" title=\"1. (2024) 4 SCC 1.\"><sup>1<\/sup><\/a> (<span style=\"font-style: italic;\">Cox and Kings<\/span>) while reiterating the general legal proposition that non-signatory persons or entities can also be bound by an arbitration agreement has harmonised the divergent strands of law emanating from the earlier judgments of the Supreme Court.<\/p>\n<p style=\"margin-bottom: 3%;\">It has been held in the <span style=\"font-style: italic;\">Cox and Kings case<\/span><a id=\"fnref2\" href=\"#fn2\" title=\"2. Cox and Kings case, (2024) 4 SCC 1.\"><sup>2<\/sup><\/a> that the basis for such joinder stems from a harmonious reading of Section 2(1)(<span style=\"font-style: italic;\">h<\/span>) along with Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001544978\" target=\"_blank\" rel=\"noopener\">7<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002726958\" target=\"_blank\" rel=\"noopener\">Arbitration and Conciliation Act, 1996<\/a> (Arbitration Act).<\/p>\n<p style=\"margin-bottom: 3%;\">While the <span style=\"font-style: italic;\">Cox and Kings case<\/span><a id=\"fnref3\" href=\"#fn3\" title=\"3. Cox and Kings case, (2024) 4 SCC 1.\"><sup>3<\/sup><\/a> decision is a step forward in strengthening the arbitration landscape in India, this article attempts to analyse some practical issues which may arise when an international non-signatory party is sought to be impleaded in a domestic arbitration.<\/p>\n<p style=\"\">Some conclusions arrived at in the <span style=\"font-style: italic;\">Cox and Kings case<\/span><a id=\"fnref4\" href=\"#fn4\" title=\"4. Cox and Kings case, (2024) 4 SCC 1.\"><sup>4<\/sup><\/a> decision which are relevant to this discussion are stated hereinbelow:<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt;\">(<span style=\"font-style: italic;\">a<\/span>) The definition of &#8220;parties&#8221; under Section 2(1)(<span style=\"font-style: italic;\">h<\/span>) read with Section 7 of the Arbitration Act includes both the signatory as well as non-signatory parties.<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt; margin-bottom: 3%;\">(<span style=\"font-style: italic;\">b<\/span>) 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.<\/p>\n<p style=\"margin-bottom: 3%;\">The Arbitration Act divides arbitrations seated in India as either &#8220;domestic arbitration&#8221;<a id=\"fnref5\" href=\"#fn5\" title=\"5. The phrase &#8220;domestic arbitrations&#8221; under the Arbitration Act appears only once in the introduction before the Preamble.\"><sup>5<\/sup><\/a> or &#8220;International Commercial Arbitration&#8221; (ICA).<\/p>\n<p style=\"margin-bottom: 3%;\">However, it only defines &#8220;International Commercial Arbitration&#8221; in Section 2(1)(<span style=\"font-style: italic;\">f<\/span>). Thus, any arbitration seated in India which is not an ICA will be a &#8220;domestic arbitration&#8221;.<\/p>\n<p style=\"\">The Arbitration Act provides for a different scheme in certain respects for a domestic arbitration vis-&agrave;-vis an ICA, as are elaborated in the table below:<\/p>\n<table style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-collapse: collapse; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; margin-left: auto; margin-right: auto; table-layout: auto; width: 200.04mm; margin-bottom: 3%;\">\n<colgroup>\n<col width=\"54\"\/>\n<col width=\"162\"\/>\n<col width=\"198\"\/>\n<col width=\"187\"\/>\n<\/colgroup>\n<tbody>\n<tr>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 14.2mm;\">\n<p style=\"text-align: center; font-weight: bold;\">Sl. No<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 42.87mm;\">\n<p style=\"text-align: center; font-weight: bold;\">Arbitration Act<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 52.39mm;\">\n<p style=\"text-align: center; font-weight: bold;\">Domestic Arbitration<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 49.59mm;\">\n<p style=\"text-align: center; font-weight: bold;\">ICA<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 14.2mm;\">\n<p style=\"text-align: center;\">1.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 42.87mm;\">\n<p style=\"margin-bottom: 3%;\">Section 2(1)(<span style=\"font-style: italic;\">e<\/span>) &#8212; Definition of court<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 52.39mm;\">\n<p style=\"margin-bottom: 3%;\">The Principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 49.59mm;\">\n<p style=\"text-align: center;\">The High Court<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 14.2mm;\">\n<p style=\"text-align: center;\">2.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 42.87mm;\">\n<p style=\"margin-bottom: 3%;\">Section 11 &#8212; Appointment of arbitrators<a id=\"fnref6\" href=\"#fn6\" title=\"6. The amendments made to Arbitration Act, S. 11 by the Arbitration and Conciliation (Amendment) Act, 2019, S. 3 have not yet been notified and thus not being considered for the purpose of this article.\"><sup>6<\/sup><\/a><\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 52.39mm;\">\n<p style=\"margin-bottom: 3%;\">Application under Section 11(6) shall lie before the High Court concerned.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 49.59mm;\">\n<p style=\"margin-bottom: 3%;\">Application under Section 11(6) shall lie before the Supreme Court.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 14.2mm;\">\n<p style=\"text-align: center;\">3.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 42.87mm;\">\n<p style=\"margin-bottom: 3%;\">Section 28 &#8212; Rules applicable to substance of dispute<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 52.39mm;\">\n<p style=\"margin-bottom: 3%;\">Substantive law for the time being in force in India.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 49.59mm;\">\n<p style=\"margin-bottom: 3%;\">In accordance with rules of law designated by the parties. Failing any designation by the parties, the Arbitral Tribunal shall apply the rules of law it considers appropriate in the circumstances.<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 14.2mm;\">\n<p style=\"text-align: center;\">4.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 42.87mm;\">\n<p style=\"margin-bottom: 3%;\">Section 29-A &#8212; Time-limit for arbitral award<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 52.39mm;\">\n<p style=\"margin-bottom: 3%;\">Award shall be made within 12 months from completion of pleadings under Section 23(4).<\/p>\n<p style=\"margin-bottom: 3%;\">Section 23(4) provides 6 months for completion of pleadings, from the date the arbitrator(s) received notice in writing of their appointment.<\/p>\n<p style=\"margin-bottom: 3%;\">The parties, by consent, can extend the period for making the award by 6 months under Section 29-A(3).<\/p>\n<p style=\"margin-bottom: 3%;\">If the award is not made within the aforesaid period, then the mandate of the Tribunal stands terminated unless extended by the Court.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 49.59mm;\">\n<p style=\"margin-bottom: 3%;\">The timeline is not strict, and the Arbitration Act only requires an endeavour to be made to dispose of the matter within a period of 12 months from completion of pleadings under Section 23(4).<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 14.2mm;\">\n<p style=\"text-align: center;\">5.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 42.87mm;\">\n<p style=\"margin-bottom: 3%;\">Section 34 &#8212; Application for setting aside an arbitral award<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 52.39mm;\">\n<p style=\"margin-bottom: 3%;\">Award can be challenged on the ground of &#8220;patent illegality appearing on the face of the award&#8221;.<\/p>\n<\/td>\n<td valign=\"top\" colspan=\"1\" style=\"border-bottom-width: 0.5pt; border-bottom-style: solid; border-bottom-color: #000000; border-left-width: 0.5pt; border-left-style: solid; border-left-color: #000000; border-right-width: 0.5pt; border-right-style: solid; border-right-color: #000000; border-top-width: 0.5pt; border-top-style: solid; border-top-color: #000000; padding-bottom: 0.0mm; padding-left: 1.91mm; padding-right: 1.91mm; padding-top: 0.0mm; vertical-align: top; width: 49.59mm;\">\n<p style=\"margin-bottom: 3%;\">Award cannot be challenged on the ground of &#8220;patent illegality appearing on the face of the award&#8221;.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p style=\"\">We have analysed this further based on the following example:<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt;\">(<span style=\"font-style: italic;\">a<\/span>) Party &#8220;<span style=\"font-style: italic;\">X<\/span>&#8221; and Party &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; are both companies incorporated in India.<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt;\">(<span style=\"font-style: italic;\">b<\/span>) They entered into a contract where &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; was to design, supply, install, test and commission an ash handling plant in a power plant being set up by &#8220;<span style=\"font-style: italic;\">X<\/span>&#8221;.<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt;\">(<span style=\"font-style: italic;\">c<\/span>) The agreement also contained an arbitration clause which provided for arbitration to be conducted in accordance with the provisions of the Arbitration Act and the seat of arbitration being Bhilai, District Durg, in the State of Chhattisgarh.<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt;\">(<span style=\"font-style: italic;\">d<\/span>) &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; is the wholly-owned subsidiary of &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221;, a company incorporated under the laws of Spain.<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt;\">(<span style=\"font-style: italic;\">e<\/span>) &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; was actively engaged in the negotiation of the contract as well as in its performance, as it undertook the designing, manufacture and supply of the most critical components and shipped them from Spain to India.<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt; margin-bottom: 3%;\">(<span style=\"font-style: italic;\">f<\/span>) Upon disputes arising between the parties, inter alia, with respect to delay in the completion of the ash handling system as well as issues in its operation, &#8220;<span style=\"font-style: italic;\">X<\/span>&#8221; issued notice invoking arbitration and <span style=\"font-style: italic;\">impleading both &#8220;Y&#8221; and &#8220;Z&#8221; to the arbitral proceedings.<\/span><\/p>\n<p style=\"margin-bottom: 3%;\">At the outset, it is pertinent to mention that the scenarios discussed below would only arise if &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; or &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; were to object to the impleadment of &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; in the arbitral proceedings.<\/p>\n<p style=\"margin-bottom: 3%;\">If &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; and &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; agree to the impleadment of &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; to the arbitral proceedings, then the subject arbitration would be considered as an ICA and dealt with accordingly under the provisions of the Arbitration Act. However, if &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; or &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; do not agree to the impleadment of &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; to the arbitral proceedings, then the following scenarios may arise.<\/p>\n<h4 style=\"background-image: linear-gradient(to left, #FFFFFF, rgb(121, 164, 210));\">Applying for interim measures by court<\/h4>\n<p style=\"margin-bottom: 3%;\">If either of the signatory parties i.e. &#8220;<span style=\"font-style: italic;\">X<\/span>&#8221; or &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221;, intends to apply to the court to seek interim measures of protection, then an issue may arise as to which court will have jurisdiction over the arbitration proceeding.<\/p>\n<p style=\"margin-bottom: 3%;\">If the arbitration was only between &#8220;<span style=\"font-style: italic;\">X<\/span>&#8221; and &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; i.e. a domestic arbitration, then it is the Commercial Court at Durg, which would have jurisdiction. However, as &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; is also sought to be made a party, it could be argued that the arbitration is an ICA and thus it is the High Court of Chhattisgarh, which will have jurisdiction.<\/p>\n<h4 style=\"background-image: linear-gradient(to left, #FFFFFF, rgb(121, 164, 210));\">Applying for the appointment of arbitrator<\/h4>\n<p style=\"margin-bottom: 3%;\">A similar situation may arise where the parties fail to act as per the procedure agreed for appointment of the Arbitral Tribunal and an application is required to be made under Section 11 of the Arbitration Act.<\/p>\n<p style=\"margin-bottom: 3%;\">If the arbitration was only between &#8220;<span style=\"font-style: italic;\">X<\/span>&#8221; and &#8220;<span style=\"font-style: italic;\">Y<\/span>&#8221; i.e. a domestic arbitration, then it is the High Court of Chhattisgarh, which would have jurisdiction under Section 11(12)(<span style=\"font-style: italic;\">b<\/span>) of the Arbitration Act. However, as &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; has also sought to be made a party, it could be argued that the arbitration is an ICA and it will be the Supreme Court, which will have jurisdiction under Section 11(12)(<span style=\"font-style: italic;\">a<\/span>) of the Arbitration Act.<\/p>\n<p style=\"margin-bottom: 3%;\">In <span style=\"font-style: italic;\">Reckitt Benckiser (India) (P) Ltd.<\/span> v. <span style=\"font-style: italic;\">Reynders Label Printing (India) (P) Ltd.<\/span><a id=\"fnref7\" href=\"#fn7\" title=\"7. (2019) 7 SCC 62.\"><sup>7<\/sup><\/a> (<span style=\"font-style: italic;\">Reckitt Benckiser case<\/span>) where both the signatories to the arbitration agreement were companies incorporated in India, the applicant had filed an application under Section 11 of the Arbitration Act before the Supreme Court of India on the assumption that it was an ICA, since it was seeking impleadment of a company established under the laws of Belgium (Respondent 2, therein) which was a non-signatory but a group company of Respondent 1 to the arbitral proceedings.<\/p>\n<p style=\"margin-bottom: 3%;\">The Supreme Court in the <span style=\"font-style: italic;\">Reckitt Benckiser case<\/span><a id=\"fnref8\" href=\"#fn8\" title=\"8. Reckitt Benckiser case, (2019) 7 SCC 62.\"><sup>8<\/sup><\/a> found that the application was not maintainable against Respondent 2 and held that no relief can be granted to the applicant who has invoked the jurisdiction of this Court on the assumption that it is a case of International Commercial Arbitration. However, as Respondent 1 was agreeable to the appointment of a sole arbitrator by the Court, it went ahead to appoint a sole arbitrator in the interest of justice. Thus, it appears that if Respondent 1 was not agreeable to an appointment by the Supreme Court, it would have relegated the applicant to take recourse before the appropriate High Court having jurisdiction.<\/p>\n<p style=\"margin-bottom: 3%;\">This example highlights the need for judicial guidance on these issues to avoid wasting resources of both the judiciary as well as the respective litigants. More so now, after the Supreme Court in the <span style=\"font-style: italic;\">Cox and Kings case<a id=\"fnref9\" href=\"#fn9\" title=\"9. Cox and Kings case, (2024) 4 SCC 1.\"><sup>9<\/sup><\/a><\/span> has held that the referral court should leave it for the Arbitral Tribunal to decide whether the non-signatory is bound by an arbitration agreement.<\/p>\n<h4 style=\"background-image: linear-gradient(to left, #FFFFFF, rgb(121, 164, 210));\">Will the order of the court be a nullity?<\/h4>\n<p style=\"margin-bottom: 3%;\">In our example, if the application under Section 11 of the Arbitration Act was made before the High Court, which left the issue of impleadment of &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; to be considered by the Arbitral Tribunal and the Arbitral Tribunal held that &#8220;<span style=\"font-style: italic;\">Z<\/span>&#8221; was bound by the arbitration agreement, the arbitration would be an ICA. In which case, one may question whether the order of the High Court was passed without jurisdiction and thus <span style=\"font-style: italic;\">void ab initio<\/span>, as it is the Supreme Court which has jurisdiction over appointment of arbitrators in an ICA.<\/p>\n<p style=\"margin-bottom: 3%;\">A similar question may have arisen in the facts involved in the <span style=\"font-style: italic;\">Reckitt Benckiser case<\/span><a id=\"fnref10\" href=\"#fn10\" title=\"10. Reckitt Benckiser case, (2019) 7 SCC 62.\"><sup>10<\/sup><\/a> decision, if the Court appointed a sole arbitrator but left the decision on impleadment to the Arbitral Tribunal and the Arbitral Tribunal also held that Respondent 2 could not be made a party to the arbitral proceedings. In fact, the Supreme Court in the <span style=\"font-style: italic;\">Reckitt Benckiser case<\/span><a id=\"fnref11\" href=\"#fn11\" title=\"11. Reckitt Benckiser case, (2019) 7 SCC 62.\"><sup>11<\/sup><\/a>, after finding that the non-signatory could not be impleaded and thus the arbitration was a domestic commercial arbitration, held that the applicant was not entitled to relief from it.<\/p>\n<p style=\"margin-bottom: 3%;\">The question of lack of jurisdiction may also arise in the event of directions passed by a court in an application for interim measures.<\/p>\n<p style=\"\">The two questions that arise from the discussion above, are:<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt;\">(<span style=\"font-style: italic;\">a<\/span>) Is the nature of an arbitration i.e. whether it is a domestic arbitration or an ICA, determined only by the status of the signatories to the arbitration agreement or is it also affected by the status of a non-signatory\/implied party?<\/p>\n<p style=\"margin-left: 36pt; text-indent: -18pt; margin-bottom: 3%;\">(<span style=\"font-style: italic;\">b<\/span>) If the nature of an arbitration is affected by the status of a non-signatory\/implied party, then at what stage does the nature of an arbitration change from a domestic arbitration to an ICA?<\/p>\n<p style=\"margin-bottom: 3%;\">With respect to the first question, a possible argument could have been that &#8220;party&#8221; is defined as a party to an arbitration agreement and Section 7 of the Arbitration Act requires an arbitration agreement to be in writing. Thus, the status of an arbitration will only depend upon the status of the signatories to an arbitration agreement and not by that of a non-signatory\/implied party. However, this argument has lost its basis after the decision in the <span style=\"font-style: italic;\">Cox and Kings case<\/span><a id=\"fnref12\" href=\"#fn12\" title=\"12. Cox and Kings case, (2024) 4 SCC 1.\"><sup>12<\/sup><\/a>, where it has been held that the definition of &#8220;parties&#8221; under Section 2(1)(<span style=\"font-style: italic;\">h<\/span>) read with Section 7 of the Arbitration Act includes both the signatory as well as non-signatory parties.<\/p>\n<p style=\"margin-bottom: 3%;\">On another note, arbitration is a matter of consent and if parties have made a conscious decision based on legal advice to sign an agreement only between Indian companies, so as to retain the status of an arbitration as a domestic arbitration, should such intention and consent of the parties be ignored on account of impleadment of an international non-signatory?<\/p>\n<p style=\"margin-bottom: 3%;\">One of the primary considerations of allowing impleadment of non-signatory parties to an arbitral proceeding is to avoid multiplicity of proceedings and fragmentation of disputes in the interest of justice. Arguendo, such purpose would still be served, while respecting the parties&#8217; choice of the kind of arbitration, if the nature of the arbitration would be dependent only upon the status of the signatories to an arbitration agreement.<\/p>\n<p style=\"margin-bottom: 3%;\">Coming to the second question- there could be two possible answers: (<span style=\"font-style: italic;\">i<\/span>) it changes the moment an international non-signatory is sought to be impleaded whether in the notice invoking arbitration or in an application under Section 11 of the Arbitration Act; or (<span style=\"font-style: italic;\">ii<\/span>) it changes after the Arbitral Tribunal upon adjudication decides that the non-signatory is also a party to the arbitration agreement.<\/p>\n<p style=\"margin-bottom: 3%;\">As far as the first proposition is concerned, it would result in putting the cart before the horse.<\/p>\n<p style=\"margin-bottom: 3%;\">As far as the second proposition is concerned, some support can be found from the decision in the <span style=\"font-style: italic;\">Cox and Kings case<\/span><a id=\"fnref13\" href=\"#fn13\" title=\"13. Cox and Kings case, (2024) 4 SCC 1.\"><sup>13<\/sup><\/a> where the Supreme Court while answering the question as to whether a non-signatory would have the right to seek relief under Section 9 of the Arbitration Act, held that once an Arbitral Tribunal comes to the determination that a non-signatory is a party to the arbitration agreement, such non-signatory can apply for interim measures under Section 9 of the Arbitration Act.<\/p>\n<p style=\"margin-bottom: 3%;\">A non-signatory&#8217;s challenge to its impleadment to an arbitral proceeding under Section 16 of the Arbitration Act, may be decided as a threshold issue. Where the adjudication of the same would require evidence to be led, it may be decided after the evidence is concluded and, in some cases, even at the time of rendering the final award.<\/p>\n<p style=\"margin-bottom: 3%;\">If the status of the arbitration would not change till the adjudication of the issue of impleadment of the non-signatory by the Arbitral Tribunal is decided and such decision is deferred by the Arbitral Tribunal till the conclusion of the evidence or passing of the final award, it may lead to anomalies in several areas.<\/p>\n<p style=\"margin-bottom: 3%;\">For instance, as explained above, the court having jurisdiction over the subject-matter may be different before and after the adjudication of the impleadment issue.<\/p>\n<p style=\"margin-bottom: 3%;\">Similarly, while a domestic arbitration would be subject to the timelines provided under Section 29-A, an ICA would not be.<\/p>\n<p style=\"margin-bottom: 3%;\">Further, where the decision of impleadment is deferred till the passing of the award, such non-signatory vis-a-vis the decision in the <span style=\"font-style: italic;\">Cox and Kings case<\/span><a id=\"fnref14\" href=\"#fn14\" title=\"14. Cox and Kings case (2024) 4 SCC 1.\"><sup>14<\/sup><\/a>, would not be able to seek interim reliefs from the courts under Section 9 till the passing of the award, which may deprive it of a substantial right, if ultimately held to be a party to an arbitration agreement.<\/p>\n<p style=\"margin-bottom: 3%;\">As far as the challenge to the award under Section 34 of the Arbitration Act and the grounds for the same are concerned, as the issue for impleadment would have been decided either way on or before the passing of the award, there would be clarity on the nature of the arbitration and thus no ambiguity appears to be arising at the stage of a Section 34 challenge.<\/p>\n<p style=\"margin-bottom: 3%;\">We can expect judicial pronouncements answering the above.<\/p>\n<\/div>\n<hr\/>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><strong><span style=\"color: #000080;\">*Partner, DSK Legal<\/span><\/strong><\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><strong><span style=\"color: #000080;\">**Principal Associate, DSK Legal<\/span><\/strong><\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn1\" href=\"#fnref1\">1.<\/a> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn2\" href=\"#fnref2\">2.<\/a> <span style=\"font-style: italic;\">Cox and Kings case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn3\" href=\"#fnref3\">3.<\/a> <span style=\"font-style: italic;\">Cox and Kings case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn4\" href=\"#fnref4\">4.<\/a> <span style=\"font-style: italic;\">Cox and Kings case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn5\" href=\"#fnref5\">5.<\/a> The phrase &#8220;domestic arbitrations&#8221; under the Arbitration Act appears only once in the introduction before the Preamble.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn6\" href=\"#fnref6\">6.<\/a> The amendments made to Arbitration Act, S. <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9000214081\" target=\"_blank\" rel=\"noopener\">11<\/a> by the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9000214315\" target=\"_blank\" rel=\"noopener\">Arbitration and Conciliation (Amendment) Act, 2019<\/a>, S. 3 have not yet been notified and thus not being considered for the purpose of this article.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn7\" href=\"#fnref7\">7.<\/a> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/Bc49i7iL\" target=\"_blank\" rel=\"noopener\">(2019) 7 SCC 62<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn8\" href=\"#fnref8\">8.<\/a> <span style=\"font-style: italic;\">Reckitt Benckiser case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/Bc49i7iL\" target=\"_blank\" rel=\"noopener\">(2019) 7 SCC 62<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn9\" href=\"#fnref9\">9.<\/a> <span style=\"font-style: italic;\">Cox and Kings case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn10\" href=\"#fnref10\">10.<\/a> <span style=\"font-style: italic;\">Reckitt Benckiser case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/Bc49i7iL\" target=\"_blank\" rel=\"noopener\">(2019) 7 SCC 62<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn11\" href=\"#fnref11\">11.<\/a> <span style=\"font-style: italic;\">Reckitt Benckiser case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/Bc49i7iL\" target=\"_blank\" rel=\"noopener\">(2019) 7 SCC 62<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn12\" href=\"#fnref12\">12.<\/a> <span style=\"font-style: italic;\">Cox and Kings case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn13\" href=\"#fnref13\">13.<\/a> <span style=\"font-style: italic;\">Cox and Kings case<\/span>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n<p style=\"margin-left: 18pt; text-indent: -18pt;\"><a id=\"fn14\" href=\"#fnref14\">14.<\/a> <span style=\"font-style: italic;\">Cox and Kings case<\/span> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/fSai19Wx\" target=\"_blank\" rel=\"noopener\">(2024) 4 SCC 1<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>by Prashant Pakhiddey* and Manav Gill**<\/p>\n","protected":false},"author":8808,"featured_media":330651,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[67357,20271],"tags":[26333,2633,3226,10131,37235,47521,45496,73025,29576,73026,5363],"class_list":["post-330644","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-dsk-legal","category-experts_corner","tag-adr","tag-arbitral_award","tag-arbitration","tag-arbitration-and-conciliation-act","tag-dispute-resolution","tag-domestic-arbitration","tag-group-of-companies-doctrine","tag-impleading-non-signatories-to-arbitration","tag-international-commercial-arbitration","tag-international-non-signatories","tag-supreme-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Impleading 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