India’s Tryst with Non-Signatories to an Arbitration Agreement in Composite Economic Transactions

Abstract

Indian courts have dealt with issues relating to the effect of an arbitration agreement on related non-signatory entities in a plethora of circumstances. And like a pendulum, their response has swung from one end of the jurisprudential paradigm to the other. While initially reluctant to bind non-signatory entities to an arbitration agreement as a matter of principle, they now adopt a pragmatic approach. Today, they are inclined to venture beyond the formal constraints of an arbitration agreement in writing, and identify entities that may have tacitly consented to arbitrate despite not signing the agreement. Against the backdrop of a conceptual discussion surrounding the issue, the paper maps this particular journey undertaken by Indian courts over the past decade. It keeps a close eye on the inconsistent application of the principles expounded by the Supreme Court of India in its seminal judgment in Chloro Controls v Severn Trent Water Purification Inc.; resulting in some confusion. In this light, the paper examines why the Supreme Court of India’s latest exposition on this issue in its judgment in Rishabh Enterprises attains significance. Accordingly, while it is inevitable that Indian courts will continue to struggle to distinguish the circumstances in which they may bind non-signatories to an arbitration agreement from those where they may not, for now, there are more signs of clarity than concern.