Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-014647-014647 – 2025 |
| Diary Number | 39210/2025 |
| Judge Name | HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Bench | HON’BLE MR. JUSTICE J.B. PARDIWALA; HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Concurring or Dissenting Judges | Both judges concurring |
| Precedent Value | Binding clarification |
| Overrules / Affirms |
|
| Type of Law |
|
| Questions of Law | Whether a referral court under Section 11 of the A&C Act must prima facie determine that a non-signatory is a veritable party to an arbitration agreement |
| Ratio Decidendi |
In disputes over joinder of non-signatories under Section 11 of the A&C Act, the referral court must prima facie examine the existence of an arbitration agreement and whether the purported non-signatory is a veritable party, while leaving detailed factual inquiries and final rulings to the arbitral tribunal under Section 16. Mere commercial relationship or assignment without prior consent does not suffice to bind a non-signatory to the arbitration clause. Formal principles of privity and contract law govern joinder, and non-signatory status requires clear evidence of intention to be bound. The Court reaffirmed precedents distinguishing “examination” at the referral stage from “ruling” at the tribunal stage, preserving the doctrine of competence-competence and ensuring efficient dispute resolution. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon |
|
| Facts as Summarised by the Court |
HPCL awarded a Tank Truck Locking System contract to AGC, which subcontracted to BCL without HPCL’s written consent. BCL later settled with AGC and acquired AGC’s receivables, then invoked HPCL’s arbitration clause. HPCL objected for lack of privity, assignment consent and time-bar. Bombay High Court referred the dispute to arbitration with a preliminary Section 16 issue. The Supreme Court set aside that order, finding no prima facie arbitration agreement between HPCL and BCL. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | High Courts (referral courts under Section 11 of the A&C Act) |
| Persuasive For | Arbitral Tribunals; trial courts and other High Courts in non-signatory joinder disputes |
| Overrules | Bombay High Court’s order in Commercial Arbitration Application No. 125/2025 |
| Follows | Supreme Court precedents in Cox & Kings, Interplay, SBI General Insurance, Ajay Patel, ASF Buildtech |
What’s New / What Lawyers Should Note
- Clarifies that at the Section 11 stage, courts must conduct a prima facie examination of both the existence of an arbitration agreement and the veritable-party status of a non-signatory.
- Reaffirms that mere assignment or commercial connection without prior written consent and intent to be bound does not import a non-signatory into an arbitration clause.
- Emphasises the separation between “examination” under Section 11 (limited, prima facie) and “ruling” under Section 16 (full merits inquiry) to uphold the doctrine of competence-competence.
- Provides a checklist for challenging Section 11 petitions by demonstrating lack of privity and absence of clear evidence of assignment consent.
- Underscores the need to secure written consent for subcontracting or assignment that carries arbitration rights.
Summary of Legal Reasoning
- The Court analysed Section 11(6-A) of the A&C Act, distinguishing the referral court’s limited “examination” power from the arbitral tribunal’s full “ruling” power under Section 16.
- It applied the non-signatory joinder framework from Cox & Kings, focusing on privity, veritable-party status, and corporate-law principles of assignment, subrogation, and novation.
- The judgment reaffirmed that a non-signatory must show clear prima facie evidence of intent to be bound; mere back-to-back agreements or escrow arrangements are insufficient.
- It held that BCL had no contractual relationship with HPCL, no prior written consent under tender clauses 3.17/5.c, and no prima facie arbitration agreement.
- Concluded that the High Court erred in referring the dispute to arbitration; Section 11 petition must be dismissed where no prima facie arbitration agreement exists between parties.
Arguments by the Parties
Petitioner (HPCL)
- No privity of contract with BCL; BCL never participated in negotiations or execution with HPCL.
- No document shows HPCL’s knowledge or consent for BCL’s subcontracting/assignment (Clauses 3.17 and 5.c).
- Claim was time-barred on its face.
- At Section 11 stage, referral court must prima facie reject non-existence of arbitration agreement.
Respondent (BCL)
- Entered into a back-to-back contract with AGC to perform the entire project.
- HPCL had constructive knowledge via emails, escrow account, and project management communications.
- Settlement-cum-assignment (31.10.2023) vested AGC’s receivables in BCL.
- Veritable-party doctrine and mixed fact-law inquiry should be left to the arbitral tribunal.
Factual Background
HPCL floated a tender for design, supply, installation and support of a Tank Truck Locking System, awarding a purchase order to AGC in 2013. AGC, without HPCL’s written consent, subcontracted to BCL in 2014. After performance disputes, BCL and AGC settled and BCL acquired AGC’s receivables against HPCL. BCL issued an arbitration notice to HPCL under Section 21 A&C Act in 2024, leading to a Section 11 petition before the Bombay High Court. The High Court appointed an arbitrator with a preliminary Section 16 issue; the Supreme Court reversed, holding no prima facie arbitration agreement between HPCL and BCL.
Statutory Analysis
- Section 7 A&C Act: Defines arbitration agreement and requirement of writing.
- Section 11(4), (6-A): Referral court’s power to appoint arbitrator and “examination” of arbitration agreement.
- Section 16: Arbitral tribunal’s power to “rule” on its own jurisdiction, including non-signatory joinder.
- Section 21: Notice of arbitration by claimant.
- Tender Conditions (Clauses 3.17, 5.c): Prohibition on subcontracting or assignment without written consent.
- Differentiates contractual assignment (rights only) from novation (obligations).
Dissenting / Concurring Opinion Summary
Both Hon’ble Justice J.B. Pardiwala and Hon’ble Justice K.V. Viswanathan delivered a unanimous judgment; no dissent or separate concurrences.
Procedural Innovations
None beyond reinforced standards for Section 11 referral courts in non-signatory contexts.
Alert Indicators
- ✔ Precedent Followed