Author : Jaya Falod
College: ICFAI University
Abstract
The classic principle of contract privity stipulates that a contract for arbitration could only be enforced against the individuals who have signed it. However, contemporary businesses have advanced complex multilayered structures, leading to the emergence of the doctrine known as the Group of Companies that seeks to bind the non-signatories that participate in the concept as well. The article will analyze the significant evolution of arbitration laws in India in regard to the subject of who can invoke that doctrine. Leaving aside the initial referral stage under Section 8 or 11, the present paper concerns itself with the arbitrary powers of an arbitration court that comes into being after its setting up and which is entitled to involve non-signing parties into the arbitration process.
The exploration of the landmark decision of the Supreme Court in the case of ASF Build Tech Private Limited v. Shapoorji Pallonji & Co. (2025) demonstrates that at the moment no tribunal is able to apply Section 16 of the Arbitration and Conciliation Act of 1996 to determine the mutual intent, corporate alter-ego relations, and unified economic substance of its participants.
To the Point
The Core Issue: Big corporations frequently carry out agreements through small subsidiaries while the parent company transfers negotiations, funding, and delivery of services. In short, whenever disagreement comes to the fore, the decision-makers take advantage of corporate protection, arguing that they are non-signatories of the arbitration clause.
The Conceptual Revolution: According to the “Group of Companies” concept, a non-signatory firm can be urged to comply with the arbitration agreement provided that the group of companies was working as a united economic body and sent an unequivocal written application to arbitrate the conflict in the past.
The Jurisdictional Authority: Before, it was believed that only civil court could ascertain whether other firms should be joined in the case. However, the Supreme Court in ASF Build Tech (2025) made it clear that after creating an arbitral tribunal its competence for joining others in the framework of Section 16 (competence-competence) is fully equal to the competence of the tribunal to decide whether it has the jurisdiction.
The Strategic Consequence: This is one of the factors that prevent lengthy litigation before the arbitration process and therefore makes it possible for courts to adhere to the “nobody touches my case” principle and pass complex corporate veil lifting cases directly to the arbitration tribunal.
Use of Legal Jargon
Privity of Contract – The basic principle of common law stating that a contract cannot grant rights or assume obligations for anyone that is not a party to the contract.
Group of Companies Doctrine – An equitable doctrine permitting an arbitration agreement to be expanded to non-signatory corporate affiliates based on their shared economic reality and active involvement in the contract.
Alter Ego – A legal concept which states that the corporation has no independent existence and is just a means of concealing another powerful entity or person.
Competence-Competence (Section 16) – The basic rule of law which gives the right to an arbitration tribunal to decide upon its jurisdiction and determine who is the proper party to the process.
Composite Transactions – Interconnected commercial contracts under which the performance of the major document depends on the other contracts with other non-signatory companies.
Ex-Ante Referral vs. Post-Constitution Impleadment – The difference between the court forcing a non-signatory to go to arbitration before the case starts and the tribunal including this non-signatory in the ongoing proceedings.
Case Laws
In the case of Cox & Kings Ltd. v. SAP India Pvt. Ltd. (2023), the Supreme Court went on to state the Group of Companies doctrine, establishing that simply because one is not a signatory does not mean that the entity in question is not a party to the arbitration agreement and that the “consent” to arbitrate can be inferred from the behavior of the corporate entity involved in the arbitration.
As stated in ASF Build Tech Pvt. Ltd. v. Shapoorji Pallonji & Co. Pvt. Ltd. (2025), this Supreme Court judgment directly follows from the aforementioned case. The judgment explicitly affirmed the key role of the arbitral tribunal in implementing the Group of Companies doctrine, as it stated that it has the authority to add a non-signatory group of companies as a party to the arbitration proceedings without seeking approval from the court.
Finally, in the case of HPCL v. BCL Secure Premises Pvt. Ltd. (2025), the Supreme Court ruled that accepting the question of non-signatories’ inclusion into arbitration proceedings is completely in line with the pro-arbitration approach of the country, showing that arbitral tribunals have all the authority needed to settle that issue without the court’s involvement.
The Proof
Proving that a corporation which has not signed an agreement can be subjected to arbitration needs to establish specific facts instead of merely showing corporate connections.
- Proof of the existence of a single economic enterprise: The claimant should give evidence that the corporation had shared board members, used the same email domains, had overlapping management, or had mixed funds. In ASF Build Tech, for example, the judge pointed out that minutes of meetings, in which affiliated members were treated as a group, constituted the essential evidence.
- Proving the activities related to the transaction: The claimant must present a paper and electronic trail which would show that the corporation was not uninvolved and could prove its active participation in contracting, negotiating, and performing the contract through the records of correspondence and project management.
- Finding an implied common intention: According to the provisions of Section 16, the tribunal is looking for evidence that shows that all parties acted as though they were part of a common complex transaction that would make it impossible for them to initiate separate proceedings in the courts of law.
Conclusion
The development of the “Group of Companies” concept from a strict exception to an effective instrument in the hands of the tribunal shows the advancement of the Indian arbitration market. The courts have confirmed in ASF Build Tech (2025) that the tribunals have the hidden power of making non-signatories liable for their obligations. This has stopped the companies using corporate methods of avoiding liability by creating independent subsidiaries. Despite this broad interpretation of this concept that implies the need for the arbitrators to exercise caution in order to not limit the rights of the genuine third parties, the shift to the active use of this concept has finally removed the pressure from the judicial system. The message from India to various companies all over the world is that without a signature you cannot avoid the dispute resolution methods even if you are not a member of the agreement
FAQs
Q1: Does the Group of Companies doctrine mean that any parent company can be brought into arbitration for its subsidiary?
No. Just because of ownership or controlling-subsidiary relations does not suffice. The parent company’s participation in negotiation, execution, or termination of the contract must be affirmative and must show an intention to be bound.
Q2: Can the arbitral tribunal add non-signatory even if a court did not name them in its order under Section 11?
Yes. Once constituted, the tribunal’s powers to determine the parties for the arbitration beyond the scope of the missing court order has been set out in the case of ASF Build Tech (2025).
Q3: What is the main advantage of allowing the tribunal to rule instead of the court?
This saves the parties from a “mini-trial” which must thus be avoided. Unraveling the corporate veil or establishing a single economic unit entails deep analysis of emails, balances, actions of witnesses and the tribunal can more readily deal with it.
Q4: Is giving notice as required by Section 21 needed to join a non-signatory to the proceedings?
The Supreme Court has made it clear that the lack of separate notice as required by Section 21 does not take away the jurisdiction of the tribunal to add a non-signatory party where notice is given through an amendment to the pleadings or a counter-claim.
