A Constitution bench of the Supreme Court ruled that an arbitration agreement can be binding even on non-signatory firms under the ‘group of companies’ doctrine.
Key points
- This doctrine makes an arbitration agreement binding on a firm which, though not a signatory, is a member of a group of companies which is a party to the agreement.
- The bench, led by Chief Justice of India held that the doctrine should be retained in Indian arbitration rules and statutes, considering its utility and determining the intention of the parties in the context of complex transactions involving multiple parties and agreements.
- The bench maintained that the doctrine can be read into the relevant provisions of the 1996 Arbitration & Conciliation Act and that the definition of “parties” under Section 2(1)(h), read with Section 7 of the Arbitration Act, included both the signatory as well as non-signatory parties.
