Key Takeaways from ASF Buildtech vs Shapoorji Pallonji & Co.

The Hon'ble Supreme Court, while dismissing an appeal, held that the Arbitral Tribunal has the autonomy to summon a non-signatory to participate in the Arbitration proceedings by applying the legal principles like the doctrine of ‘group of companies’, ‘alter ego’, ‘composite transactions’.

In this case, Shapoorji Pallonji & Co. Pvt. Ltd. (“SPCPL”) had invoked the “Group of Companies” doctrine to justify the inclusion of ASF Buildtech Pvt. Ltd. (“ABPL”) and ASF Insignia SEZ Pvt. Ltd. (“AISPL”) in certain Arbitration Proceedings, arguing that ABPL, AISPL, and Black Canyon SEZ Pvt. Ltd. (“BCSPL”) are part of the ASF Group, and they acted as a cohesive unit in the performance of the underlying contracts. ABPL challenged its impleadment, contending that it was not a party to the Arbitration Agreement and was not involved in the contracts.

The Supreme Court, after considering the divergent views of the different High Courts on impleadment of a non-signatory party, concluded that ABPL was rightly impleaded in the Arbitration Proceedings. The Court relied upon the doctrine of “Group of Companies” and how ABPL was actively involved in the underlying contracts. The Court further emphasized that the Arbitral Tribunal is the preferred forum for determining such issues and urged legislative clarity on the power of impleadment in Arbitration.

The Supreme Court of India has time and again emphasized the principle of Kompetenz-Kompetnz; as per which, the Tribunals have the authority and are competent to decide upon the preliminary issues. Thus, the Arbitral Tribunals can include a non-signatory party in a case if legal principles like the “group of companies” or “alter ego” are applicable.

This power cannot be just limited to courts, and thus, the Arbitral Tribunals can decide on their own as to who should be a party to the Arbitration proceedings pending before them. While passing this judgement, the Court has urged the Department of Legal Affairs to consider these issues, as there are no clear rules that exist despite the Supreme Court time and again seeking to address these issues in its earlier judgements, and also to include the remedial measures in the upcoming Arbitration Bill, 2024.

The Supreme Court considered various judgements which affirms the principle of Komptenze-Komptenze, thereby minimizing judicial intervention in arbitration proceedings. One such judgement considered was the ruling in Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2024 SCC Online SC 1634) wherein the companies that didn’t even sign the Agreement were bound if they acted as part of the same group and showed clear involvement, i.e., intention. Thus, what matters is the behaviour and mutual understanding between the companies and not just the business ties. The Hon’ble Supreme Court used the Cox and Kings case to decide if ABPL, though not a signatory, could still be part of the Arbitration. It found that ABPL was deeply involved in the contract dealings and can be treated as a real party to the agreement. It refined the “Group of Companies” doctrine, clarifying that its legal basis lies in Section 2(1)(h) and Section 7 of the Arbitration Act, not in the phrase “claiming through or under” in Sections 8 and 45. It emphasized the Arbitral Tribunal's competence to determine whether a non-signatory is bound by an arbitration agreement. The Court further relied upon the judgement in Ajay Madhusudan Patel v. Jyotrindra S. Patel (2024 SCC Online SC 2597, wherein the test was to determine whether a non-signatory is a “veritable party” to an Arbitration Agreement or not. It emphasized that the involvement of a non-signatory must be positive, direct, and substantial, rather than incidental.

The Court relied upon this case to assess ABPL's conduct and involvement in the underlying contracts. It found that ABPL's actions aligned with those of the ASF Group, leading SPCPL to reasonably believe that ABPL was a party to the arbitration agreement. One of the issues raised by ABPL was that it had not been served any notice under Section 21 of the Arbitration Act and thus it cannot be made a party. The Court then relied upon the judgement in State of Goa v. Praveen Enterprises (2012) 12 SCC 581 wherein it was clarified that the purpose of a notice under Section 21 of the Arbitration and Conciliation Act, 1996 (“Act”), is primarily for determining the commencement of arbitration for limitation purposes and does not restrict the scope of claims or counterclaims. The Court relied upon this case to reject ABPL's argument that the absence of a notice under Section 21 of the Act invalidated its impleadment. It held that the notice is not a precondition for the Tribunal's jurisdiction over a non-signatory and thus the purpose of a notice under Section 21 of the Act is to determine the commencement of arbitration for limitation purposes, and non-service of such notice does not bar raising additional claims or counterclaims during arbitration. It also relied upon the judgement in Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. (2025 INSC 507) which affirmed that an Arbitral Tribunal has the power to implead non-signatories under Section 16 of the Act, and that non-service of a notice under Section 21 of the Act does not nullify the Tribunal's jurisdiction. The Court relied on the significance of this case to conclude that the Arbitral Tribunal was competent to implead ABPL, even in the absence of a notice under Section 21 of the Act.

The cases being relied upon by the Supreme Court collectively provided the legal framework for determining the jurisdiction of the Arbitral Tribunal, the applicability of the “Group of Companies” doctrine, and the procedural requirements under Section 21 of the Act. The Supreme Court has from time to time clarified that Arbitral Tribunals are the preferred forum for deciding jurisdictional issues, including the impleadment of non-signatories, and that procedural lapses like the absence of a notice under Section 21 of the Act and others will not impede such power.

Various principles laid down by the Supreme Court of India were applied to the facts of the present case to conclude that ABPL was rightly impleaded as it was substantially involved in the underlying contracts and its alignment with the ASF Group's conduct. The evolving jurisprudence around non-signatories reflects the Indian judiciary’s growing acceptance of the complex realities of modern commercial transactions. This judgement firmly reinforces that the Arbitral Tribunal has the competence to implead non-signatories, even in the absence of an express reference by courts. This signals a shift towards minimal judicial interference and greater faith in arbitral forums to adjudicate nuanced, fact-heavy issues such as corporate control, group structures, and party conduct. The reaffirmation of doctrines like ‘group of companies’, estoppel, and ‘alter ego’ further broadens the scope for bringing necessary third parties into the fold of arbitration.

 While this expansion promotes efficiency and avoids parallel litigation, it also raises critical concerns around consent and procedural fairness. The risk of dragging unwilling non-signatories into arbitration without sufficient safeguards could potentially undermine the consensual foundation of the process. As laws relating to arbitration in India continue to evolve, especially with the proposed legislative reforms in the pipeline, it is essential that the balance between commercial practicality and foundational principles of party autonomy and due process is carefully maintained.

About the authors: Tanuj Hazari and Pallavi Tayal Chadda are lawyers associated with KNM & Partners Law Offices. They are both Advocates-on-Record practicing before the Supreme Court of India.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.