Introduction
Party Autonomy and Kompetenz-Komptenez form the bedrock of Arbitration. In addition to the governing law and seat of the arbitration, the Parties can choose and appoint Arbitrator(s) as per an agreed upon procedure. Once an Arbitral Tribunal has been formed, the Tribunal has the authority to decide upon the questions of its jurisdiction, arbitrability of disputes, etc.
The decision of the Supreme Court in ASF Buildtech v. Shapoorji Pallonji and Company[i] has clarified that the jurisdiction of the Arbitral Tribunal can extend to third parties/non-signatories by impleading them as a party to the arbitral proceedings under the Arbitration and Conciliation Act, 1996 [“the Act”].
The Supreme Court discussed, at length, the dichotomy between the decisions of various High Courts on the issue and clarified that the Arbitral Tribunal can on its own accord, implead third parties. However, the Court did not lay down specific guidelines or framework to be followed by the Arbitral Tribunal while impleading a third party which may lead to unwanted situations.
The article analyses the decision of the Supreme Court focussing on the rights of the third parties, should they be impleaded in the arbitral proceedings. The article draws a distinction between the power of the Tribunal to implead third parties and the power to pass interim reliefs/orders against them or affecting them. For this, various decisions of the High Courts have been looked at, and it is argued that the third parties, depending on the facts and circumstances of each case, must be given certain rights to safeguard their interests.
Further, the article suggests amendments that may be made to the Act given that there is no express provision for impleading third parties, which may lead to arbitrary decisions and abuse of the process. The rules of various Arbitration Institutions have been looked at for this purpose.
Muddy Waters: From Chloro controls to Cox and Kings
The Supreme Court in ASF Buildtech clarified that the Arbitral Tribunal can implead third parties by applying the ‘Group of Companies’ doctrine [“the Doctrine”], by lifting the corporate veil and various other doctrines. The Supreme Court held in Chloro Controls India Private Limited v. Severn Trent Water Purification[ii] that the Courts have the power to implead non signatories by applying the Doctrine in multi-party agreements after a thorough application of mind. The Court interpreted the power to trigger the Doctrine and implead third parties to be falling within the scope of the words ‘any person claiming through or under him’ in section 45 of the Act [later added to section 8 as well] and ‘parties’ in section 8 of the Act. Both these sections empower the Courts to refer a matter to arbitration if a ‘party’ or a ‘any person claiming through or under him’ makes an application to the Court. Thus, it was believed that only the Courts have the power to implead third parties and not the Arbitral Tribunal. (ASF Buildtech, ¶.32)
The above-mentioned interpretation of the expression was held to be incorrect by the Supreme Court in its judgment in Cox and Kings Limited v. SAP India Pvt. Ltd. & Anr.[iii] (¶.147)and it was held that the expression ‘any person claiming through or under him’ refers to persons who form the basis of their claim or right by “standing in the shoes of the original signatory party” or by substituting them and such persons are not ‘third parties’. Further, the Court in ASF Buildtech noted that the scope of enquiry in a proceeding under section 11 of the Act should be restricted to examining the existence of a prima facie arbitration agreement and nothing else. (In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996, ¶.185).[iv] Once the prima facie existence of the arbitration agreement is decided, the Courts are not allowed to go into issues that the matters are “ex facie meritless, frivolous, vexatious” (SBI General Insurance Co. Ltd. v. Krish Spinning, ¶.114).[v] Thus, if a party makes a request to implead a third party under a section 11 application, the Court must only check the prima facie existence of the arbitration and after the appointment of the arbitrator, the question must be decided by the tribunal.
What follows from the decision of the Supreme Court in ASF Buildtech is that a third party may be impleaded by the Arbitral Tribunal, on its own accord, notwithstanding the question not being raised before the referral Court under section 11 of the Act (¶.88, ASF Buildtech). This gives a wide power to the Arbitral Tribunal and although it is a step in the right direction, such impleadment may hamper the rights of third parties, as will be discussed later in this Article.
With no specific time frame for deciding the question of impleading a third party laid down in the judgment, the Parties, including the third parties, may use the process to abuse the other parties by filing frivolous applications for impleadment which may further delay the proceedings. Allowing the parties to implead other parties or other parties to implead themselves should not delay the adjudication of the original claims filed and should not delay the existing proceedings.[vi] Further, the consent of all the parties must be present for impleadment, and the parties should be forced to arbitrate only in exceptional cases.
Power of Arbitral Tribunal to pass orders against third parties: Rights of third parties and considerations
Prior to the decision in Chloro Controls, the High Courts had a difference of opinion on the issue whether impleadment of third parties is allowed under the Act or not? It was held by the Madras High court in Shoney Sanil v. Coastal Foundations (P) Ltd. & Ors ¶.6 that the extent of jurisdiction of the Court under section 9 of the Act is limited to the signatories to the arbitration agreement and not third parties.[vii]
After Chloro Controls, the power to implead third parties was believed to be available under the Act, the power of Arbitral Tribunal of impleadment was questioned with decisions favouring both the opinions. The question also included the power of the Arbitral Tribunal to pass interim reliefs/orders against third parties.
In one of the decisions favouring the opinion that the Courts have the power to order interim reliefs and orders against third parties, it was noted that such power was not available under section 17 as it specifically allows for measures to be made only against the signatories (Gatx India Pvt. Ltd. v. Arshiya Rail Infrastructure Limited & Anr. ¶.66).[viii]
After the Arbitration and Conciliation (Amendment) Act, 2015[ix], the powers of the Arbitral Tribunal to pass interim reliefs/orders under section 17 of the Act were made equal to those of the Courts under section 9 of the Act by adding that “the arbitral tribunal shall have the same power for making orders as the Court has for the purpose of, and in relation to, any proceedings before it” to section 17.
Even post the amendment, it was held in Kauvery Medical Care (India) Ltd. v. CeeDeeYes Health Care Services (P) Limited and Ors. (¶.23) that the Arbitral Tribunal does not have the power to pass orders against third parties, since it cannot even implead them.[x] Although the Courts have the power to pass orders against the third parties, the Arbitral Tribunal being the creation of the Contract between the parties cannot venture outside the contract to issue such directions (Blue Coast Infrastructure Development Pvt. Ltd. v. Blue Coast Hotels Ltd. & Anr., ¶.27).[xi]
There may be cases in which an order of the Tribunal under section 17 or an order the Court under section 9 may nevertheless affect third parties, even if they weren’t made party to the proceedings. In a case where the goods owned by Third Parties that were the subject matter of an arbitration and were attached pursuant to an order of the Tribunal, the Court in Prabhat Steel Traders Pvt. Ltd. & Ors. v. Excel Metal Processors Pvt. Ltd. & Ors. (¶.55), noted that such third party has the right to appeal against such an order under section 37 of the Act or seek impleadment under section 9 before the Court.[xii] Similarly, in Gatx India (¶.63)[xiii], the Court noted that, in facts and circumstances of the case, an award made against the signatory party would also have to be honoured by the third party under the deed of guarantee. The Court further noted that two kinds of orders, with respect to third parties, may be made by the Courts under section 9. The first one where the order incidentally affects the third parties and does not affect its rights. The second kind of order is a relief against third parties that affects their rights. The Court noted that the second kind of orders must be made in exceptional situations and only to prevent gross injustice, the object of arbitration, rights of the party to arbitration, etc. depending upon the circumstances. (¶. 71, Gatx India).
Thus, the two situations in which a third party may be affected by an order under section 17 or section 9 of the Act are: –
Where the third party is privy to the Contract and the parties and, therefore, may be bound by the Arbitration Agreement as per the Doctrine, lifting the corporate veil or through implied consent, etc.
Where the third party is the owner of the goods that are the subject matter of the arbitration or have an interest in the subject matter of the arbitration but may not be related to the parties.
In the first scenario, the third party that is impleaded by virtue of its connection to the Contract and the parties must be allowed to bring claims/counter claims against the original claimant or respondent, as the case may be and must, for all intents and purposes of the Act, be treated as a signatory party to the arbitration agreement. This should include the right to file for setting aside under section 34 of the Act, file evidence, employ expert witnesses, etc. Further, the concerns regarding impartiality of the Arbitrator(s) must also be properly addressed as the third party may not have the opportunity to participate in the appointment of the Arbitral Tribunal. The third party, during the hearing of the application of impleadment, must be allowed to raise questions regarding the impartiality of the arbitrator(s) and such questions must be decided by applying the same standards and provisions as provided in the Act.
In the second scenario, the third party must be given an opportunity to apply for such reliefs so as to protect their interests in the subject matter and challenge the order under section 37 of the Act but may not be allowed to challenge the award on the grounds that it was not made party to the proceedings, so as to invalidate the whole proceedings.It may only be allowed to challenge the award only to the extent it affects its rights and not on any other grounds.
In any case where a third party is sought to be impleaded, the Arbitral Tribunal must afford them the opportunity of being heard and must prevent the abuse of the process by any party. For this purpose, the Arbitral Tribunal can impose cost on the parties as held by the Supreme Court in ASF Buildtech (¶. 107). Further, the third parties must be allowed to file for appropriate reliefs under section 17 of the Act.
After the 2015 amendment, especially in light of the Supreme Court’s decision in ASF Buildtech, since the Arbitral Tribunal has jurisdiction over third parties in order to implead them, it can also pass orders against them or affecting them. As the Delhi High Court[xiv] has noted in Asad Mueed & Anr. v. Hammad Ahmed & Ors. (¶.23 & 26), the powers of the Arbitral Tribunal under section 17 are identical to that of a Court under section 9 of the Act after the 2015 amendment. Therefore, under section 17, the Tribunal can frame injunctions and orders of protection even against third parties.
Suggested Reforms
Arbitration rules of the leading arbitration institutions such as the London Court of International Arbitration Rules, 2020 (“LCIA Rules”),Singapore International Arbitration Centre Arbitration Rules, 2025 (“SIAC Rules”), Honk Kong International Arbitration Centre Rules 2024 (“HKIAC Rules”) specifically allow joinder of third parties. The LCIA Rules(Art. 22.1(x)) give a wide discretion to the Arbitral Tribunal to decide on the joinder if the party applying for joinder and the third party expressly consent in writing which means a joinder may be ordered despite no consent of the objecting party (The LCIA Guidance Note for Parties and Arbitrators Section 11.7, ¶. 269). The SIAC Rules (Art. 18) and the HKIAC Rules (Art. 27) allow for a joinder of a third party if all the parties including the third-party consents or if they are prima facie bound by the agreement. The HKIAC Rules state the time limit for raising such request of joinder to be no later than in the Statement of Defence. Further, it states that after joinder, all the parties shall have waived their right to designate an arbitrator.
The Parliament, taking note of the decision of the Supreme Court in ASF Buildtech, must make necessary changes to the Act so as to provide for third party impleadment by the arbitral tribunal. A specific provision on this account must be added to the Act, similar to the rules of the institutions mentioned above. This provision must also include the timelines for the whole process of third party impleadment. It is suggested that the application/issue (if the tribunal decides to implead on its own accord) of third party impleadment must be decided as early as possible and the parties including the third party must not be allowed to make such an application after the preliminary hearings or after the parties raise jurisdictional challenges under section 16 of the Act, if any. If the parties do not raise any issue(s) to third party impleadment, they should be deemed to have given their consent and must not be allowed to raise the issue(s) at a later stage.
It is reiterated that the Parties must be given a proper opportunity of being heard after which the party shall not be allowed to raise objections regarding the jurisdiction of the Tribunal.
Conclusion
The Supreme Court has settled the debated issue of the power of the Arbitral Tribunal to implead third parties. However, as noted above there is no specific provision in the Act and the Supreme Court did not lay down guidelines for the Tribunal to be followed while impleading third parties. Mutual consent of the parties is the cornerstone of Arbitration and allowing third parties to arbitrate may raise concerns that may threaten the validity of the award, if not addressed properly during the impleadment stage. The Arbitral Tribunal must uphold the principles of natural justice and prevent misuse of the process.
While third party impleadment may raise pressing concerns, it may be necessary to allow third parties to arbitrate to make adjudication more efficient and to protect the rights and interests of the third parties. The Legislature must make efforts to lay down a procedure that specifies the timeline of deciding an application of impleadment, the stages at which it can be filed and the principles to decide such application. Arbitrary application of the Doctrine of lifting of corporate veil may hamper the proceedings resulting in increased costs and time for the parties along with questions regarding the confidentiality of the proceedings. Therefore, to preserve the sanctity of the Arbitral Proceedings the Legislature must make necessary changes to the Act, as noted above.
[i] ASF Buildtech Private Limited v. Shapoorji Pallonji and Company 2025 INSC 616.
[ii] Chloro Controls India Private Limited v. Severn Trent Water Purification (2013) 1 SCC 641.
[iii] Cox and Kings Limited v. SAP India Pvt. Ltd. & Anr. 2023 INSC 1051.
[iv] In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 2023 INSC 1066.
[v] SBI General Insurance Co. Ltd. v. Krish Spinning 2024 INSC 532.
[vi] Gary Born, International Commercial Arbitration (3rd edn, Kluwer Law International B.V. 2021) 2792.
[vii] Shoney Sanil v. Coastal Foundations (P) Ltd. & Ors AIR 2006 Ker 206.
[viii] Gatx India Pvt. Ltd. v. Arshiya Rail Infrastructure Limited & Anr. 2015 VAD (Delhi) 190.
[ix] Arbitration and Conciliation (Amendment) Act 2015 (Act No. 3 of 2016).
[x] Kauvery Medical Care (India) Ltd. v. CeeDeeYes Health Care Services (P) Limited and Ors. C.M.P. No. 26352 of 2023.
[xi] Blue Coast Infrastructure Development Pvt. Ltd. v. Blue Coast Hotels Ltd. & Anr. 2020 DHC 2071.
[xii] Prabhat Steel Traders Pvt. Ltd. & Ors. v. Excel Metal Processors Pvt. Ltd. & Ors. Arbitration Petition No. 619 of 2017.
[xiii] Gatx India (n. 11)
[xiv] Asad Mueed & Anr. v. Hammad Ahmed & Ors. 2023/DHC/001008.
Author(s)
Harsh Jain
Law Graduate from GNLU, Gandhinagar