Arbitration pact can bind non-signatories: SC

'Group of companies' doctrine upheld

- BHAVINI MISHRA

The Supreme Court on Wednesday ruled that non-signatory firms can be bound by arbitration agreement under the 'group of companies' doctrine. This means that companies that belong to the same group of firms, but are not signatories to the arbitration agreement, can still be bound by the agreement.

"The 'group of companies' doctrine must be retained in the Indian arbitration jurisprudence conside its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements," the Bench of Chief Justice of India (CJI) DY Chandrachud, Justices Hrishikesh Roy, P S Narasimha, JB Pardiwala and Manoj Misra said in the Cox and Kings vs SAP India Pvt Ltd verdict.

A party who is not a signatory to the arbitration agreement will still be bound by it provided that there is a clear and defined legal relationship between signatories and non signatories.