Presence of non-signatory in an arbitration proceeding

Whether a non-signatory to an arbitration agreement can be permitted to remain present in arbitral proceedings between signatories.

Kamal Gupta v. M/s. L.R. Builders Private Limited

A. Background and Facts

The dispute originated from a family settlement between Pawan Gupta and Kamal Gupta in 2015, which was later formalized in a Memorandum of Understanding (MoU)/Family Settlement Deed (FSD) in 2019. Notably, the MoU excluded Rahul Gupta (Kamal Gupta's son), who was not a signatory to the agreement .

When disputes arose and the arbitration clause under the MoU was invoked, Rahul Gupta and other non-signatory entities sought permission to attend the proceedings and access case records . The Delhi High Court initially dismissed this request on March 22, 2024 . However, in August and November 2024, the High Court, in already disposed of Section 11(6) proceedings, allowed the non-signatories to attend the arbitration, citing its inherent power  .

The signatories challenged this order in the Supreme Court, arguing that allowing non-signatories would violate the confidentiality of the arbitral process .

B. Issues Before the Court

The Supreme Court framed two issues for consideration :

  1. Whether a non-signatory to an arbitration agreement can be permitted to remain present in arbitral proceedings between signatories.
  2. Whether, after appointing an arbitrator under Section 11(6) of the Act, the Court can issue further directions in disposed of proceedings concerning arbitration that have commenced post-appointment of the arbitrator.

C. The Court's Analysis and Findings

1. On Non-Signatories' Attendance in Arbitration

The Supreme Court examined Sections 2(h) and 35 of the Arbitration Act and determined that an arbitral award would only bind the signatories and those claiming under them . The Court emphasized that arbitration is a consensual process, and only parties who have signed the arbitration agreement have the legal right to participate .

The Court observed that since the non-signatories in this case were strangers to the MoU/FSD and not claiming under any party, the award would not bind them. The Court considered permitting a non-signatory to be present in proceedings where the award would not bind them to be "unknown to law" .

The Court also highlighted the importance of confidentiality in arbitration, pointing to Section 42A of the Arbitration Act, which mandates that the arbitrator, arbitral institution, and parties maintain confidentiality of all proceedings . Allowing non-signatories to attend would violate this statutory mandate, as they are not bound by the same duty of privacy and may have conflicting interests.

2. On Judicial Intervention Post-Appointment of Arbitrator

The Court applied the principle of functus officio to hold that once an arbitrator is appointed under Section 11(6) of the Act, the Court has discharged its statutory role and has no further jurisdiction in the matter. The Court reasoned that the Arbitration Act is a self-contained Code governing all stages of arbitration, from commencement to execution of the award.

The Court emphasized that Section 5 of the Act precludes judicial intervention in matters not expressly provided in Part I of the Act  . It further held that Section 151 of the Code of Civil Procedure 1908 could not be invoked to reopen proceedings, as doing so would amount to an abuse of the legal process.

D. Judgment and Implications

The Supreme Court set aside the Delhi High Court's order permitting non-signatories to attend the arbitration. The Court declared that the applications filed by the non-signatories in the disposed of Section 11(6) proceedings were misconceived and an abuse of the process of law. The Court also imposed costs of ₹3,00,000 on the respondents (non-signatories), payable to the Supreme Court Advocates-on-Record Association.

This judgment has several significant implications for arbitration practice in India:

  1. It reinforces the private and consensual nature of arbitration, limiting participation to those who have explicitly agreed to the process.
  2. It upholds the confidentiality provisions under Section 42A, emphasizing the importance of privacy in arbitral proceedings.
  3. It clarifies that non-signatories' remedies are limited to challenging the enforcement of an arbitral award against them under Section 36 of the Act.
  4. It restricts judicial intervention after the appointment of an arbitrator, promoting the principle of minimal court interference in arbitration.




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