The Supreme Court on Wednesday held that non-signatories or third parties may be joined as parties within the same arbitration proceedings.
A Constitution Bench headed by CJI D.Y. Chandrachud expanded the scope of the term “parties” provided under the Arbitration and Conciliation Act, 1996 saying that it includes both signatory and non-signatory parties.
The 5-judge bench, Hrishikesh Roy, P.S. Narasimha, J.B. Pardiwala and Manoj Misra, was considering whether jurisdiction of an arbitral tribunal could be extended to non-signatories.
It said that the mandatory requirement of written agreement doesn’t exclude the possibility of non-signatory parties as their conduct could be an indicator of their consent.
It added that the tribunal will determine if different corporate entities could be treated as a single economic unit in arbitration proceedings.
Earlier, a 3-judge bench had said that the ‘group of companies’ doctrine requires a relook and referred the question to a larger bench.
The doctrine provides that a non-signatory party could be bound by an arbitration agreement if such a company is closely related and forms a single economic unit and a mutual intention can be made out amongst all the parties to be bound by the proceedings.
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