Case Name: Kamal Gupta & Anr. vs. M/S L.R. Builders Pvt. Ltd. & Anr. Etc.
Case Number: Civil Appeals arising out of SLP (Civil) Nos. 4775-4779 of 2025
Date of Judgment: August 13, 2025
Quorum: Hon’ble Justice Pamidighantam Sri Narasimha and Hon’ble Justice Atul S. Chandurkar
Facts
A family settlement of the Gupta family relates to several properties and businesses. On 20.06.2015, some members of the Gupta family (PG and KG) entered into an oral family settlement, and later it was formed into a Memorandum of Understanding/Family Settlement Deed (MoU/FSD) on 09.07.2019. One of the members, Rahul Gupta (RG), son of KG, did not sign the MoU/FSD. PG commenced arbitration against KG and RG under Section 11(6) of the Arbitration and Conciliation Act, 1996, to appoint an arbitrator. RG, being a non-signatory, was denied the opportunity to intervene and be a part of the arbitration application. An arbitrator was appointed, and then RG and some other non-signatory companies made subsequent compromising applications seeking permission to intervene and to be present during the arbitral proceedings. The learned judge allowed these non-signatory third parties to observe the arbitration proceedings. The signatories to the MoU/FSD then moved their challenge against this intervention order to the Supreme Court.
Issues
Whether a non-signatory to an arbitration agreement has the right to be present at the arbitration proceedings.
After the appointment of an arbitrator made under Section 11(6), does the Court have any ancillary jurisdiction to give further directions in relation to the arbitration proceedings?
Legal Provisions Involved
Section 11(6) of the Arbitration and Conciliation Act, 1996: Appointment of arbitrator.
Section 35 of the Arbitration and Conciliation Act, 1996: Arbitral awards are binding.
Section 42A of the Arbitration and Conciliation Act, 1996: Confidentiality in arbitral proceedings.
Section 151 of the Code of Civil Procedure, 1908: Inherent powers of the court.
Section 5 of the Arbitration and Conciliation Act, 1996: Minimum judicial interference.
Precedents: Nimet Resources Inc. v. Essar Steels Ltd., (2009) 17 SCC 313; the Constitution Bench judgment in Re: Interplay between Arbitration Agreements and Indian Stamp Act, 2023.
Arguments
Petitioners’ Arguments
The Court is functus officio upon deciding the Section 11(6) application and has no jurisdiction to entertain applications made by non-signatories
Only parties to the arbitration agreement (MoU/FSD) are legally entitled to better participate in proceedings under the legislative structure. Section 35 implies that only parties to the arbitration agreement are bound by the binding award.
To allow intervention by non-signatories would be a breach of the confidentiality protected in Section 42A and would also remove the autonomy inherent in arbitration.
The directions entitling RG to participate in the proceedings, or to recognize RG’s assertion about property rights, are wholly outside the scope of the proceedings already disposed of by this court and amount to an unlawful review or alteration of those proceedings.
Respondents’ Arguments
The respondents asserted that intervention was justified because a breach of assurances had occurred, giving rise to problems respecting the properties owned by signatories (PG and KG), justifying non-signatories’ applications for interim relief.
The undertakings recorded by the court were binding, and therefore, reliefs such as RG’s ability to participate in the proceedings and his implication regarding property rights merely enforced the undertakings of the two signatories.
The Court held that jurisdiction was properly invoked under Section 151 CPC and that the directions did not violate or go more than the earlier order under Section 11(6) as the respective rights could still be established before the arbitrator.
Analysis
The Supreme Court had the opportunity to review the law of arbitration in depth. It reaffirmed that the award of an arbitrator binds only the parties to the agreement and those claiming through them topically (Section 35). The statute does not confer any legal right on a non-signatory to observe or partake in the proceedings, as permitting either would violate statutory confidentiality (Section 42A). The decision articulated the character of the Arbitration Act as a “self-contained code”; once the arbitrator is appointed, the Court cannot intervene (functus officio), except in circumstances prescribed by the statute (Section 5).
The Court accepted that RG and the intervenor companies were not signatories, nor had those intervenors endeavoured such a claim through the parties to the arbitration agreement. The judge who entertained any intervention after the disposal of the Section 11(6) proceedings had to do so on a jurisdictional basis. Further, in reliance on Section 151 CPC to establish an intervention took away from the impotencies established by the Arbitration Act, was held irreconcilable.
Judgment
The Supreme Court reversed the order from which the non-signatories intervenors were granted permission to attend and participate in the arbitration. The Court found RG and the other intervenor companies’ applications were misguided and an abuse of process. The Court found that once the arbitrator was appointed, the arbitrator’s jurisdiction was spent and any subsequent judicial action would be contrary to the statute and case authority. The Court ordered the respondents to pay costs of ₹3,00,000/- to the Supreme Court Advocates On-Record Association, within two weeks.
Conclusion
The judgment firmly upheld that parties to an arbitration agreement, or parties claiming through parties to an arbitration agreement, can only be parties to or bound by an arbitral proceeding. Non-signatories to the arbitration agreement could not be joined as parties, invited to intervene, or allowed to observe arbitral proceedings without any statutory authority. The judgment positively reinforced the principles of confidentiality, minimal judicial intervention, and party autonomy embodied in the Arbitration and Conciliation Act, 1996. The Supreme Court reaffirmed its own opposing jurisprudence concerning judicial intervention and overreach in arbitration, set aside the lower court orders allowing non-signatories to participate in the proceedings, and restored clarity and certainty in the statutory framework.
“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal falls into the category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”
WRITTEN BY __ Kondala Phani Priya
