Case title:
Kamal Gupta & Anr. v. M/s L.R. Builders Pvt. Ltd. & Anr. Etc.
Date of Order:
13 August 2025
Bench:
Justice Pamidighantam Sri Narasimha, Justice Atul S. Chandurkar
Parties:
•Appellants: Kamal Gupta & another
•Respondents: M/s L.R. Builders Pvt. Ltd. & another
SUBJECT
Whether a non-signatory to an arbitration agreement can attend arbitral proceedings, and whether a court retains jurisdiction to issue further directions in disposed Section 11(6) proceedings after appointing an arbitrator.
IMPORTANT PROVISIONS
Section 2(h), Arbitration and Conciliation Act, 1996
“Party” means a party to an arbitration agreement.
Section 5, Arbitration and Conciliation Act, 1996
Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.
Section 9, Arbitration and Conciliation Act, 1996
Allows parties to apply to the court for interim measures before or during arbitral proceedings or after the making of an award but before its enforcement.
Section 11(6), Arbitration and Conciliation Act, 1996
Where a party fails to act as required under the appointment procedure agreed upon, the appointment may be made, on request of a party, by the Supreme Court or the High Court, as the case may be.
Section 17, Arbitration and Conciliation Act, 1996
The arbitral tribunal may order interim measures during arbitral proceedings.
Section 35, Arbitration and Conciliation Act, 1996
Subject to Part I, an arbitral award shall be final and binding on the parties and persons claiming under them respectively.
Section 36, Arbitration and Conciliation Act, 1996
Enforcement of an arbitral award.
Section 42A, Arbitration and Conciliation Act, 1996
The arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain the confidentiality of all arbitral proceedings except where disclosure is necessary for implementation or enforcement of the award.
Section 151, Code of Civil Procedure, 1908
Saves the inherent powers of the court to make orders necessary for the ends of justice or to prevent abuse of the process of the court.
Facts
The conflict originated from a Memorandum of Understanding/Family Settlement Deed of 9 July 2019 between Pawan Gupta (PG) and Kamal Gupta (KG), as noted after a family settlement of June 2015. Rahul Gupta (RG), who is the son of KG, was not a signatory to this MoU/FSD. PG and another filed Section 11(6) proceedings asking for the appointment of an arbitrator and also filed a Section 9 petition asking for interim relief.
RG made intervention applications in both the proceedings to join and resist the arbitration. These were refused on 22 March 2024, with the Court ordering a sole arbitrator and treating the Section 9 petition as the Section 17 application.
Subsequently, on 5 August 2024, RG and other non-signatory businesses made new intervention applications in already disposed of Section 11(6) case, requesting an opportunity to be heard in arbitral proceedings, obtaining access to pleadings and awards, and resuscitating earlier intervention requests.
On 7 August 2024, the High Court granted them an opportunity to be heard in arbitral proceedings, and on 12 November 2024 made this order absolute, also making directions excluding certain properties from arbitration. PG and KG approached the Supreme Court challenging the jurisdiction of the High Court to entertain such applications after appointment of the arbitrator.
ISSUES RAISED
Two questions were framed by the Supreme Court:
- Whether it is valid for a non-signatory of an arbitration agreement to be present in arbitral proceedings.
- Once an arbitrator is appointed under Section 11(6) of the Arbitration Act, whether the court still has jurisdiction to give ancillary directions in those disposed proceedings.
ARGUMENTS PRESSED BY THE APPELLANTS
The appellants argued that after the Section 11(6) application was determined and the sole arbitrator appointed, the court was functus officio and could not entertain any further applications on the subject.
Referring to Section 35, they underlined that an arbitral award is binding only upon the parties to the arbitration agreement and persons claiming under them; RG and the other intervenors were not. Enabling them to attend would have no legal function and would violate Section 42A's mandate of confidentiality.
They were not led by Nimet Resources Inc. v. Essar Steels Ltd. (2009) 17 SCC 313, para 32, where the Supreme Court held that non-parties to an arbitration agreement have no locus in arbitral proceedings unless claiming through a party.
They also referred to the Constitution Bench ruling in In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act and the Indian Stamp Act, paras 80 and 85, which elucidated that Section 5 does not permit judicial interference save as explicitly stated and the Arbitration Act being a self-contained code.
The appellants contended that the directions of the High Court tantamounted to reviewing and amending the previous 22 March 2024 order, which had turned down intervention. The appellants also faulted the acceptance of RG's 23% interest in family properties as jurisdictionally unsustainable within Section 11(6) proceedings.
The respondents also contended that the directions followed from undertakings made by PG and KG in the 22 March 2024 judgment, paras 17–18, which they purported to violate. They claimed that this violation warranted resort to Section 151 CPC to safeguard the interests of non-signatory stakeholders.
In their view, allowing RG's presence and acknowledging his share was an unavoidable consequence of enforcing those undertakings, and not a reconsideration of the previous order. They argued that the instructions were not in contravention of the Arbitration Act as they were based on equitable powers.
JUDGMENT ANALYSIS
The Supreme Court started off by referring to the 22 March 2024 order, in which the High Court had specifically rejected RG's intervention applications in Section 11(6) as well as Section 9 proceedings, noting that although the arbitrator may address intervenors' property, it would not be binding upon them (para 34). This constituted a clear judicial conclusion that non-signatories were neither necessary parties nor privileged to attend the arbitration.
Reiterating the legislative stance, the Court relied upon Section 35 read with Section 2(h) of the Act to hold that an arbitral award is binding only on parties to the agreement and persons claiming through them. As RG and the companies were neither signatories nor claiming through any signatory, they were not entitled by law to attend or observe proceedings.
The Court incorporated Nimet Resources Inc, para 32, which stated that arbitration is a process by consent, binding only the parties who had consented to it, and strangers cannot join in unless there is an express legal relationship with one of the parties to the contract. Referring to this, the Court concluded that RG was an absolute stranger to the MoU/FSD.
It then discussed confidentiality under Section 42A. The legislative purpose, said the Court, is to maintain confidentiality in arbitration. Allowing strangers to watch would violate confidentiality. The Court considered this violation an independent ground to negate the order of the High Court.
On the point of jurisdiction, the Court followed the Constitution Bench ruling in Interplay. At para 80, the Bench had clarified that Section 5 has a positive aspect (judicial authorities can only intervene where Part I permits) and a negative aspect (judicial authorities are not permitted to intervene in a case where the tribunal has sole jurisdiction). At para 85, it had stressed that the Act is a code in itself, barring general procedural legislations unless specifically incorporated, and that none of the actions not envisaged by the Act are permissible.
The Court also relied on Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd, para 24, which emphasized that the non-obstante clause of Section 5 is there to curtail unwarranted judicial intervention and reinforce the UNCITRAL Model Law's purpose. Following this, the Supreme Court held that after appointment under Section 11(6), the High Court could not have entertained new applications in the settled case. The doctrine of functus officio applied squarely.
The Court turned down dependency on Section 151 CPC, observing that inherent powers cannot supersede a special statute's express provisions nor expand jurisdiction where the statute purports minimal judicial intervention. It reaffirmed Subal Paul v. Malina Paul, para 19, which held that when a special statute prescribes a particular procedure, general procedural provisions get excluded.
Lastly, the Court ruled that the directions of the High Court amounted to reviewing and amending its previous final order, which was not permitted in the absence of review jurisdiction. Acceptance of RG's 23% stake and excluding properties from arbitration were substantive changes beyond the competence of the court under Section 11(6) jurisdiction.
CONCLUSION
Answering both questions in the negative, the Supreme Court set aside the 12 November 2024 order. It held that non-signatories cannot attend arbitral proceedings, as they are neither bound by the award nor entitled to participate under the Arbitration Act. Post-appointment of an arbitrator under Section 11(6), the court becomes functus officio and cannot issue ancillary directions in those proceedings. The appeal was allowed with costs of ₹3,00,000 to be paid to the Supreme Court Advocates-on-Record Association.
