Introduction
Imagine a tense family business dispute where two brothers, who are signatories to a formal agreement, decide to resolve their differences through arbitration. The situation becomes complicated when a third brother, not a signatory, insists on being present during the proceedings. He argues that the outcome will undoubtedly affect his interests, even though he is not a formal party to the contract. This hypothetical scenario cuts to the heart of a crucial legal question: Can a non-signatory to an arbitration agreement participate in the proceedings? The Supreme Court has repeatedly addressed this issue, emphasizing that the sanctity and confidentiality of arbitration must be protected.
The Court stance has been clear: a non-signatory generally has no right to attend arbitration proceedings. This principle is rooted in the very nature of arbitration as a private and confidential process. The judiciary’s role is to ensure that this confidentiality, a cornerstone of the A&C Act, 19961, is not compromised.
In a crucial observation in Kamal Gupta & Anr. Versus M/S L.R. Builders Pvt. Ltd & Anr. Etc2., the Supreme Court of India, through a bench comprising Justices PS Narasimha and AS Chandurkar, set aside a Delhi High Court decision that had allowed non-signatories to attend arbitration proceedings with their counsels. This ruling clarifies a critical question with a firm “no,” reinforcing the principle that arbitration is a private, confidential, and exclusive matter for the signatories.
This decision is not an isolated incident but rather a reaffirmation of a consistent judicial stance on the matter. Over the years, Indian courts have carefully delineated the boundaries of who can and cannot be involved in arbitration.
For instance, in a case from the Delhi High Court in Paradise Plastics Enterprises Limited Versus JRG Automotive Industries India Pvt. Ltd & Ors.3 (ARB.P. 655/2025), the issue was whether referral courts could determine if non-signatories were bound by an arbitration agreement. The court held that the arbitral tribunal itself, not the court, should decide the substantive involvement of non-signatories, cautioning that their participation without a proper basis could compromise confidentiality, a key tenet of Section 42A of the Act. Similarly, in Amazon.com NV Investment Holdings LLC v. Future Coupons Pvt Ltd4 The Court was concerned about the introduction of confidential arbitral pleadings into unrelated regulatory proceedings, a clear demonstration of judicial anxiety regarding third parties accessing sensitive information.
The Supreme Court has previously addressed this issue in other contexts. In Mahanagar Telephone Nigam Ltd. v. Canara Bank5, it was established that while non-signatories could, in certain situations, be referred to arbitration, this did not automatically grant them the right to attend proceedings or access confidential materials. The Court emphasized that such protections apply unless a formal joinder or a binding status is established. This was further solidified in Cox and Kings Ltd. v. SAP India Pvt Ltd & Anr6., where the Supreme Court recognized the “Group of Companies doctrine” for binding non-signatories but reiterated that those not formally joined remain prohibited from accessing confidential proceedings or materials under Section 42A.
These precedents collectively form a clear and consistent legal philosophy: the sanctity and confidentiality of arbitration proceedings must be protected from unwarranted intrusion by non-parties. It was against this backdrop of judicial firmness that the present controversy, an appeal concerning the High Court’s decision to permit a non-signatory, RG, to remain present during arbitration proceedings, now came before the Supreme Court.
The appellants argued that the High Court had acted without jurisdiction. They contended that after disposing of the Section 11(6) application and appointing the sole arbitrator, the court became functus officio—its authority had ceased. They further highlighted that under Section 35 of the Act, an arbitral award is only binding on the parties to the agreement and those claiming under them.
Since RG was not a signatory to the MoU/FSD, the award would not bind him, rendering his presence legally baseless. The appellants also asserted that allowing a non-signatory to be present would violate the confidentiality principle enshrined in Section 42A of the Act, which requires the arbitrator and parties to maintain the secrecy of the proceedings. They also argued that the High Court’s order was, in effect, a review of a previous decision that had already denied the non-signatories’ intervention, thereby being a jurisdictional overreach.
In contrast, the respondents defended the High Court’s order, arguing that the applications were filed because the signatories had allegedly breached assurances recorded in the initial judgment. They claimed the non-signatories’ presence was a necessary consequence of the initial order and that the court had correctly used its inherent powers under Section 151 of the CPC7.
Ultimately, the Supreme Court’s decision was not a sudden pronouncement but a well-reasoned judgment based on fundamental principles of the Arbitration and Conciliation Act, 1996. The Court’s rationale revolved around several key points, all of which underscore the exclusive and confidential nature of arbitration.
The very first question the court addressed was the jurisdictional validity of the Delhi High Court’s order. When a court appoints an arbitrator under Section 11(6) of the Act, its role is concluded. As the Court observed, once an arbitrator is appointed, the court becomes functus officio—meaning its official function is over. Therefore, how can a court entertain a new application from a non-signatory after the primary proceedings have been disposed of? The Court concluded that the High Court’s decision to allow the non-signatory’s presence was a jurisdictional overreach and beyond the court’s powers at that stage.
Another critical point raised by the Court centered on the binding nature of the arbitral award. Section 35 of the Act specifies that an award is binding only on the parties to the arbitration agreement and those claiming under them. In this case, the non-signatory was not a party to the MoU/FSD, so the award would not legally bind him. If a non-signatory is not bound by the outcome, then what legal right justifies their presence? The Court reasoned that permitting a stranger to attend proceedings that do not affect them is a “course unknown to law.”
The Court also delved into the legislative intent behind the Act, citing Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899. This precedent, the Court noted, established the Act as a “self-contained code.” It limits judicial intervention (Section 5) to what is expressly provided within the Act. Since there is no provision allowing for the presence of a non-signatory observer, the High Court’s direction was in direct conflict with this principle.
Perhaps the most compelling argument, and one that the Supreme Court has consistently emphasized, is the principle of confidentiality. Section 42A of the Act mandates that the arbitrator, the arbitral institution, and the parties must maintain confidentiality of all arbitral proceedings. By permitting a non-signatory to be present, the High Court’s order directly breached this core tenet. The Court highlighted that the legislative intent to maintain confidentiality would be entirely defeated if strangers were allowed to observe the proceedings. The privacy and trust that underpin arbitration would be eroded.
Conclusion
This consistent judicial stance, culminating in the Supreme Court’s recent definitive ruling, sends a clear and unambiguous message: the sanctity and confidentiality of arbitration proceedings are paramount. By firmly denying a non-signatory the right to participate, the Court has not only upheld the integrity of the A&C Act, 19968 but has also fortified the very essence of arbitration as a private, party-driven process. The judgment serves as a powerful reminder that an arbitration agreement is a deliberate contractual commitment, and its benefits and obligations are, with very few exceptions, exclusively for those who have signed it.
The Court’s emphasis on the principles of functus officio and confidentiality establishes a solid legal barrier against unwarranted intrusion, ensuring that the trust and privacy essential for effective arbitration are not compromised.
Looking ahead, this ruling will have significant ramifications for how corporate and family disputes are handled, particularly where non-signatories have a vested, albeit indirect, interest. It reinforces the need for all potentially affected parties to be meticulously included in arbitration agreements from the outset, if they wish to have a voice in the proceedings. The decision acts as a cautionary tale, prompting businesses and families to be more deliberate and exhaustive in their legal agreements. It also reduces the potential for procedural delays and challenges, as it curtails the ability of third parties to stall or complicate arbitration by seeking to intervene. This clarity will foster greater confidence in arbitration as a reliable and confidential dispute resolution mechanism, knowing that the process is secure from external interference.However, as the legal landscape evolves, a new question may eventually rise to the fore: In light of the growing complexity of modern corporate structures, where a non-signatory may be an indirect beneficiary or a de facto controller, could there be a future legal doctrine that allows for limited, qualified participation of such a party, not as a full participant, but perhaps as an observer with restricted rights under specific, court-sanctioned conditions? While the current jurisprudence is unequivocal, the inherent fairness doctrine and the need for awards to be implementable might, in the distant future, compel courts to revisit this strict boundary in highly unique and specific circumstances.
Citations
- Arbitration and Conciliation Act, 1996
- Kamal Gupta & Anr. Versus M/S L.R. Builders Pvt. Ltd & Anr. Etc.SLP (Civil) Nos. 4775-4779/2025
- Delhi High Court in Paradise Plastics Enterprises Limited Versus JRG Automotive Industries India Pvt. Ltd & Ors. (ARB.P. 655/2025)
- Amazon.com NV Investment Holdings LLC v. Future Coupons Pvt Ltd 2021SCC Online CCI 63
- Mahanagar Telephone Nigam Ltd. v. Canara Bank(Civil Appeal Nos. 6202-6205 of 2019)
- Cox and Kings Ltd. v. SAP India Pvt Ltd & Anr.Arbitration Petition No. 38 of 2020
- Code of Civil Procedure, 1908
- Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, 2023 INSC 1066
Expositor(s): Adv. Anuja Pandit
