Supreme Court of India
AJAY MADHUSUDAN PATEL & ORS.versusJYOTRINDRA S. PATEL & ORS.
- Citation
- 2024 INSC 710
- Decided
- 20 September 2024
- Disposal
- Appeal(s) allowed
- Bench
- D Y CHANDRACHUD
Holding
The referral court must confine its examination under Section 11(6) to the prima facie existence of an arbitration agreement and leave the determination of a non‑signatory’s jurisdiction to the arbitral tribunal.
Summary
The AMP Group and the JRS Group entered into a Family Arrangement Agreement (FAA) containing an arbitration clause, and later sought to appoint a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. The petition raised two questions: the scope of the referral court’s jurisdiction after the 2015 amendment inserting Section 11(6A), and whether the SRG Group, which did not sign the FAA, could be joined in the arbitration. The Supreme Court examined the legislative intent of Section 11(6A), held that the court’s inquiry is limited to a prima‑facie determination of the existence of an arbitration agreement, and that complex factual issues about a non‑signatory’s consent must be decided by the arbitral tribunal. It found that the arbitration agreement existed, but the question of SRG’s status required detailed fact‑finding beyond the court’s remit. Consequently, the Court appointed Justice Akil Kureshi as the sole arbitrator and allowed the petition.
Issues considered
- What is the scope of jurisdiction of the referral court under Section 11(6) of the Arbitration and Conciliation Act, 1996, especially after the insertion of Section 11(6A)?
- Whether, on a prima facie view, the SRG Group, a non‑signatory to the Family Arrangement Agreement, can be referred to arbitration?
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11(6), s. 11(6A), s. 16, s. 2(1)(h), s. 7, s. 8
- Contract Act, 1872
Subjects
Section 11(6) of Arbitration and Conciliation Act, 1996Appointment of arbitratorsNon-signatory to the Family Arrangement AgreementScope of Court’s power u/s.11 of Arbitration and Conciliation Act, 19962015 Amendment to the Act, 1996Existence of Arbitration agreementValidity of Arbitration agreementVeritable partyNon-signatory partyDisputed questions of factLegislatively overruled
Judgment
[2024] 9 S.C.R. 894 : 2024 INSC 710
Ajay Madhusudan Patel & Ors.
v.
Jyotrindra S. Patel & Ors.
(Arbitration Petition No. 19 of 2024)
20 September 2024
[Dr Dhananjaya Y Chandrachud, CJI,
J.B. Pardiwala* and Manoj Misra, JJ.]
Issue for Consideration
What is the scope of jurisdiction of the referral court under
Section 11(6) of the Arbitration and Conciliation Act, 1996; Whether
in the instant case, on a prima facie view, the SRG Group being
a non-signatory to the Family Arrangement Agreement (FAA), can
be referred to arbitration.
Headnotes†
Arbitration and Conciliation Act, 1996 – s.11(6) – Appointment
of arbitrators – Scope of jurisdiction of the referral Court:
Held: SBP & Co. case expanded the scope of the Court’s power
under Section 11 while empowering the referral courts to decide
several preliminary issues – Boghara Polyfab case went to the
extent of identifying three categories of preliminary issues that
may arise for consideration in an application under Section 11 –
However, the insertion of Section 11(6A) through the 2015
Amendment to the Act, 1996 stipulated that the Courts under
Section 11 shall confine their examination to the ‘existence’ of
an arbitration agreement – It legislatively overruled the decisions
in SBP & Co. and Boghara Polyfab by virtue of its non-obstante
clause – Duro Felguera case, in clear terms, clarified the effect
of the change brought in by Section 11(6A) and stated that all
that the Courts need to see is whether an arbitration agreement
exists - nothing more, nothing less – Vidya Drolia case endorsed
the prima facie test in examining the existence and validity of an
arbitration agreement both under Sections 8 and 11 respectively –
However, it was clarified that in cases of debatable and disputable
facts and reasonably good arguable case, etc. the Court may
refer the parties to arbitration since the arbitral tribunal has the
* Author
[2024] 9 S.C.R. 895
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
authority to decide disputes including the question of jurisdiction –
It was further stated that jurisdictional issues concerning whether
certain parties are bound by a particular arbitration under the
group-company doctrine etc. in a multi-party arbitration raise
complicated questions of fact which are best left to the tribunal to
decide – In Re: Interplay Between Arbitration Agreements under
Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, the
position taken in Vidya Drolia case was clarified to state that the
scope of examination under Section 11(6) should be confined to
the “existence of the arbitration agreement” under Section 7 of
the Act, 1996 and the “validity of an arbitration agreement” must
be restricted to the requirement of formal validity such as the
requirement that the agreement be in writing – Krish Spinning
case cautioned that the Courts delving into the domain of the
arbitral tribunal at the Section 11 stage run the risk of leaving the
claimant remediless if the Section 11 application is rejected – The
Cox and Kings case specifically dealt with the scope of inquiry
under Section 11 when it comes to impleading the non-signatories
in the arbitration proceedings – While saying that the referral
court would be required to prima facie rule on the existence of
the arbitration agreement and whether the non-signatory party is
a veritable party to the arbitration agreement, it also said that in
view of the complexity in such a determination, the arbitral tribunal
would be the proper forum. [Para 65]
Arbitration and Conciliation Act, 1996 – Whether in the instant
case, on a prima facie view, the SRG Group being a non-
signatory to the Family Arrangement Agreement (FAA), can
be referred to arbitration:
Held: An important factor to be considered by the Courts
and Tribunals is the participation of the non-signatory in the
performance of the underlying contract – The intention of the
parties to be bound by an arbitration agreement can be gauged
from the circumstances that surround the participation of the non-
signatory party in the negotiation, performance, and termination of
the underlying contract containing such an agreement – Further,
when the conduct of the non-signatory is in harmony with the
conduct of the others, it might lead the other party or parties to
legitimately believe that the non-signatory was a veritable party
to the contract containing the arbitration agreement – However, in
order to infer consent of the non-signatory party, their involvement
896 [2024] 9 S.C.R.
Digital Supreme Court Reports
in the negotiation or performance of the contract must be positive,
direct and substantial and not be merely incidental – Thus, the
conduct of the non-signatory party along with the other attending
circumstances may lead the referral court to draw a legitimate
inference that it is a veritable party to the arbitration agreement –
In the instant case, the clauses of FAA such as clause 2.1.4 read
with Schedule 7, clause 2.1.6 read with Schedule 8, clause 2.1.7,
gives an impression, though prima facie, that the SRG Group
may be connected to the FAA and forms part of the settlement
contemplated therein – However, this aspect needs to be looked
into more closely by the Arbitral Tribunal – On bare perusal of the
email exchanges produced by the petitioner, it appears prima facie
that several contested questions of fact need to be first resolved –
A detailed examination of numerous disputed questions of fact are
imperative in deciding whether the SRG Group participated in the
negotiation and performance of the underlying contract and can be
bound by the arbitration agreement – There is a limited jurisdiction
afforded under Section 11(6) of the Act, 1996 – This Court cannot
conduct a mini trial and delve into contested or disputed questions
of fact – Therefore, considering the complexity involved in the
determination of the question whether the SRG Group is a veritable
party to the arbitration agreement or not, it would be appropriate
for the arbitral tribunal to take a call on the question after taking
into consideration the evidence that may be adduced by the parties
before it and the application of the legal doctrine as elaborated in
the decision in Cox and Kings case. [Paras 70, 71, 77, 78, 79, 80]
Case Law Cited
In Re: Interplay Between Arbitration Agreements under Arbitration
and Conciliation Act, 1996 and Stamp Act, 1899 [2023] 15 SCR
1081 : (2024) 6 SCC 1; Cox and Kings Ltd. v. SAP India Pvt. Ltd
[2024] 9 SCR 199 : (2024) 4 SCC 1 – followed.
Duro Felguera S.A. v. Gangavaram Port Limited [2017] 10 SCR
285 : (2017) 9 SCC 729; Garware Wall Ropes Ltd. v. Coastal
Marine Constructions & Engineering Ltd. [2019] 5 SCR 579 :
(2019) 9 SCC 209; Vidya Drolia and Ors. v. Durga Trading
Corporation [2020] 11 SCR 1001 : (2021) 2 SCC 1; SBI General
Insurance Co. Ltd. v. Krish Spinning [2024] 7 SCR 840 : (2024)
SCC OnLine SC 1754 – relied on.
SBP & Co. v. Patel Engg. Ltd. [2005] Supp. 4 SCR 688 : (2005) 8
SCC 618; National Insurance Company Limited v. Boghara Polyfab
[2024] 9 S.C.R. 897
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
Private Ltd [2008] 13 SCR 638 : (2009) 1 SCC 267; Sasan Power
Ltd. v. North American Coal Corporation (India) Private Ltd [2016]
6 SCR 809 : (2016) 10 SCC 813 – referred to.
LF Ltd. v. PNB Housing Finance Ltd. (2024) SCC OnLine Del
2165; Moneywise Financial Services (P) Ltd. v. Dilip Jain (2024)
SCC OnLine Del 1896; Cardinal Energy and Infra Structure Pvt.
Ltd. v. Subramanya Construction & Development Co. Ltd. (2024)
SCC OnLine Bom 964 – referred to.
Books and Periodicals Cited
246th Report of the Law Commission of India.
List of Acts
Arbitration and Conciliation Act, 1996; Contract Act, 1872.
List of Keywords
Section 11(6) of Arbitration and Conciliation Act, 1996; Appointment
of arbitrators; Non-signatory to the Family Arrangement Agreement;
Scope of Court’s power u/s.11 of Arbitration and Conciliation
Act, 1996; 2015 Amendment to the Act, 1996; Existence of
Arbitration agreement; Validity of Arbitration agreement; Veritable
party; Non-signatory party; Disputed questions of fact; Legislatively
overruled.
Case Arising From
CIVIL ORIGINAL JURISDICTION: Arbitration Petition No. 19 of 2024
(Under Section 11(6) read with Section 11(9) of the Arbitration and
Conciliation Act, 1996)
Appearances for Parties
Darius Khambhata, Sr. Adv., Keyur Gandhi, Shamik Shirishbhai
Sanjanwala, Kunal Vyas, Anmolgandhi, Prabhakar Yadav,
Ms. Shubhangi Agarwal, Abhishek Jamalpur, Advs. for the
Petitioners.
Huzefa Ahmadi, Sr. Adv., Anuj K. Trivedi, Ms. Anushree Prashit
Kapadia, Ms. Ekta Kundu, Ms. Ruby Singh Ahuja, Ms. Aakriti Vohra,
Ms. Simran Jeet, Vasu Singh, Rohan Sharma, M/s. Karanjawala
& Co., Advs. for the Respondents.
898 [2024] 9 S.C.R.
Digital Supreme Court Reports
Judgment / Order of the Supreme Court
Judgment
J.B. Pardiwala, J.
For the convenience of exposition, this judgment is divided in the
following parts:
INDEX*
A. FACTUAL MATRIX.......................................................... 3
B. SUBMISSIONS ON BEHALF OF THE PETITIONER
(AMP GROUP)............................................................... 25
C. SUBMISSIONS ON BEHALF OF THE RESPONDENT
(JRS GROUP).................................................................. 31
D. SUBMISSIONS ON BEHALF OF THE RESPONDENT
(SRG GROUP)................................................................ 32
E. ANALYSIS....................................................................... 38
i. Scope of jurisdiction of the referral court under
Section 11(6) of the Act, 1996............................... 38
ii. Whether on a prima facie view, the SRG Group
being a non-signatory to the FAA, can be referred
to arbitration?........................................................ 55
F. CONCLUSION................................................................. 66
1. The present petition has been filed under Section 11(6) read with
Section 11(9) of the Arbitration and Conciliation Act, 1996 (hereinafter,
“the Act, 1996”) seeking appointment of a Sole Arbitrator to adjudicate
the disputes between the Petitioners and the Respondents in terms
of Clauses 7.2 and 7.3 respectively of the Family Arrangement
Agreement dated 28.02.2020 (hereinafter, “the FAA”) read with the
Amendment Agreement dated 15.05.2020 (hereinafter, “Amendment
to the FAA”) entered into between the petitioner AMP Group and
respondent JRS Group.
* Ed. Note: Pagination as per the original Judgment.
[2024] 9 S.C.R. 899
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
2. Since the Petitioner No. 13 i.e., Silvercity Management Ltd. is a
company incorporated outside India having its office at 17, Bond
Street, St. Helier, Jersey, JE2, 3NP, an island in the English Channel,
northwest of France and the Petitioner No. 14 i.e., Hiral Ashit Patel
is an individual, who is a citizen and resident of Canada, the dispute
between the Parties falls within the definition of an international
commercial arbitration under Section 2(1)(f) of the Act, 1996.
A. FACTUAL MATRIX
3. For convenience, the Parties involved in the present petition and the
respective groups of which they form a part of are tabulated below:
S. NAME PETITIONER/ GROUP
NO. RESPONDENT
1. Ajay Madhusudan Patel Petitioner No. 1 AMP
2. Apoorva Madhusudan Patel Petitioner No. 2 AMP
3. Meeta Ajay Patel Petitioner No. 3 AMP
4. Sonal Apoorva Patel Petitioner No. 4 AMP
5. Bhavik Ajay Patel Petitioner No. 5 AMP
6. Jinal Ajay Patel Petitioner No. 6 AMP
7. Kaushal Apoorva Patel Petitioner No. 7 AMP
8. Nishkal Apoorva Patel Petitioner No. 8 AMP
9. Apoorva M. Patel (HUF) Petitioner No. 9 AMP
10. Spectrum Ingredients Pvt. Ltd. Petitioner No. 10 AMP
Rep. by its Director
11. Sai Fragrances & Flavours Petitioner No. 11 AMP
Pvt. Ltd. Rep. by its Director
12. Zest Aromas Pvt. Ltd. Petitioner No. 12 AMP
Rep. by its Director
13. Silvercity Management Ltd. Petitioner No. 13 AMP
Rep. by its Chairman
14. Hiral Ashit Patel Petitioner No. 14 AMP
15. Jyotrindra S. Patel Respondent No. 1 JRS
16. Rajesh C. Patel HUF Respondent No. 2 JRS
17. Sanjay S. Patel Respondent No. 3 JRS
18. Finhelp Investments and Respondent No. 4 JRS
Consultants (Mumbai) Pvt. Ltd.
Rep. by its Director
900 [2024] 9 S.C.R.
Digital Supreme Court Reports
19. Greenbiz Holdings and Respondent No. 5 JRS
Consultants Pvt. Ltd. Rep. by
its Director
20. Jyotrindra S. Patel and Sanjay Respondent No. 6 JRS
S. Patel (Holding for and on
behalf of J&S Associate –
AOP) Rep. by its Member
21. Millenium Estates Pvt. Ltd. Respondent No. 7 SRG
Rep. by its Director
22. Deegee Software Pvt. Ltd. Respondent No. 8 SRG
Rep. by its Director
23. Samarjitsinh R. Gaekwad Respondent No. 9 SRG
(Shareholder & Director of
Millenium Estates Pvt. Ltd. and
Deegee Software Pvt. Ltd.)
24. Radhikaraje S. Gaekwad Respondent No. 10 SRG
(Shareholder of Deegee
Software Pvt. Ltd.)
25. Subhanginiraje R. Gaekwad Respondent No. 11 SRG
(Shareholder of Deegee
Software Pvt. Ltd.)
26. Gaekwad Services Ltd. Respondent No. 12 SRG
now known as Gaekwad
Enterprise Pvt. Ltd. Rep.
by its Managing Director
(Shareholder of Deegee
Software Pvt. Ltd.)
27. Samarjitsinh Gaekwad HUF Respondent No. 13 SRG
(Shareholder of Deegee
Software Pvt. Ltd.)
28. Rajesh C. Patel (Shareholder Respondent No. 14 JRS
of Deegee Software Pvt. Ltd.)
29. Shilpa R. Patel (Shareholder Respondent No. 15 JRS
of Deegee Software Pvt. Ltd.)
30. Aditya Patel (Director of Respondent No. 16 SRG
Deegee Software Pvt. Ltd.)
31. Nitin Shripadbhai Pujari Respondent No. 17 SRG
(Director of Deegee Software
Pvt. Ltd.)
[2024] 9 S.C.R. 901
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
4. The Petitioners herein are collectively referred to as the “AMP
Group”. The Petitioner Nos. 1 to 9 & 14 respectively are individuals
and family members of Mr. Ashit Patel, who are a part of the AMP
Group in the FAA. The Petitioner Nos. 10 to 13 respectively are
companies described as a part of the AMP Group in the FAA. The
Petitioner No. 13 is a company incorporated outside India and the
Petitioner No. 14 is a resident of a foreign country.
5. The Respondents are divided into two groups i.e., “JRS Group”
consisting of Respondents 1 to 6, 14 & 15 and “SRG Group”
consisting of Respondents 7 to 13, 16 & 17. The Millenium Estates
Pvt. Ltd. (hereinafter, “Millenium”) and Deegee Software Pvt.
Ltd. (hereinafter, “Deegee”) are Respondent 7 and 8 companies
respectively. The Respondents 9 to 17 are all either Directors or
Shareholders of Respondent 7 and 8 companies. Therefore, the
Respondents comprise of individuals, Companies and Shareholders
and Directors of the respective companies dealt with under the FAA.
6. Apart from the Petitioners and Respondents aforementioned, a few
other individuals find a repeated mention in the facts of the present
petition. First, Mr. Ashit M. Patel who is the Power of Attorney Holder of
Petitioner Nos. 1 to 9 and 14 of the AMP Group. He is the co-brother
of Respondent No.1. Secondly, Mr. Kalpesh Parmar, a Chartered
Accountant who represented the interests of the JRS Group during
the negotiations leading up to the FAA, the implementation of the
FAA and the first round of mediation. He is alleged to have also
represented the interests of the SRG Group during the same. In the
last, Mr. Pankaj Agarwal, an employee of Deegee.
7. Mr. Ashit Patel representing the AMP Group and Mr. Jyotrindra S.
Patel (Respondent No.1) of the JRS Group are co-brothers and
married in the same family. The two groups were jointly engaged in
various businesses and co-owned several entities. Subsequently, the
SRG Group had joined hands with the AMP Group and JRS Group in
two entities i.e. Millenium and Deegee. SRG Group presently holds
40% equity shares in Millenium.
8. It is the case of the Petitioners that between 2013 & 2019, various
disputes arose between the AMP Group on one side and the JRS and
SRG Groups on the other which led to the filing of several proceedings
before various forums including the National Company Law Tribunal
(hereinafter, “NCLT”) at New Delhi, Mumbai and Ahmedabad by
902 [2024] 9 S.C.R.
Digital Supreme Court Reports
the AMP Group. The same are still pending before the respective
forums. It is pertinent to note that, of the aforesaid disputes, the
respondent No.9 of the SRG Group is one of the respondents in
CP/383/2017 pertaining to Deegee, filed by the AMP Group before
the NCLT at Mumbai.
9. The Best Value Chem. Ltd. (hereinafter, “BVC”) is an entity involved
in the business of manufacturing aroma chemicals co-owned by the
AMP and JRS Groups. The Premji Group had initiated a proposal
to buyout BVC and indicated that the deal could only go through
if the litigations filed against BVC were withdrawn. Therefore, the
parties thought it fit to resolve all the issues between them once and
for all with the understanding that the AMP Group would completely
takeover various entities and that the JRS and SRG Groups would
co-own other entities.
10. During negotiations that preceded the execution of the FAA, the
following events/communications took place;
• Vide emails dated 12.12.2019 and 02.01.2020, several internal
documents required for the valuation of Millenium and Deegee
were shared by Mr. Pankaj Agarwal with the AMP Group wherein
a copy was marked to Mr. Kalpesh Parmar.
• Vide email dated 14.01.2020 sent to the AMP Group, Mr. Kalpesh
Parmar confirmed that the matters pertaining to Millenium and
Deegee even after its valuation may have to be discussed with
Mr. Samarjitsinh (hereinafter, “Respondent No. 9”) of the SRG
Group before finalisation. The said excerpt from the contents
of the email are reproduced hereinbelow:
“…The pending details from Pankaj, if I correctly
understand then it is related to documents of Millenium
and Deegee, Even if we consider both of it to be
treated separately, it can be done because even
after valuation, the matter needs to be discussed
out with Samarjitsinh before finalising. Therefore, in
the binding agreement you can put necessary points
covering both the properties and till it is not resolved
we can work out some alternate solution so that both
the groups are covered properly….”
(Emphasis supplied)
[2024] 9 S.C.R. 903
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
• A joint meeting was arranged by Mr. Kalpesh Parmar and
attended by Mr. Ashit Patel of the AMP Group and Respondent
No.9 of the SRG Group.
• Vide email dated 25.01.2020 sent to the AMP Group, Mr.
Kalpesh Parmar suggested that the valuation of Millenium be
finalized in consultation with the Respondent No.9 of the SRG
Group. The said excerpt from the contents of the email are
reproduced hereinbelow:
“…In view of releasing above deadlock situation,
I am suggesting that we include in FAA binding
methodology to resolve it. For Chandan Sanjaybhai,
Jagdishbhai & AMP can sit and decide the value
within __ days from execution of FAA, Similarly for
Millenium Sanjaybhai, Samarjitsinh & AMP can sit
and close it along with issue of residential flats. This
can also be done within __ days from execution of
FAA. In the meantime, whatever valuation/s so far
JRS has given on Chandan & Millenium will stand
withdrawn, so nothing is there on table from JRS side
on the value of Chandan & Millenium. Therefore, we
can proceed to close on FAA & Escrow agreement
on Monday. If you can flip this suggestion with AMP,
I can try to convince Sanjaybhai too…”
(Emphasis supplied)
11. Subsequently, the FAA dated 28.02.2020 was entered into between
the AMP Group and JRS Group. The terms of the FAA impose
several obligations on the AMP and JRS Groups in pursuance of
the settlement contemplated therein.
12. It is pertinent to observe that the present petition relates primarily to
the dispute arising from specific clauses wherein the SRG Group is
also required to undertake certain steps and actions specified viz,
(a) Clause 2.1.4 read with Schedule 7 on Millenium Exit (presently
AMP Group holds 36% while SRG Group holds 40%) where AMP
Group is required to exit and SRG Group is required to purchase
additional shares; (b) Clause 2.1.5 requiring Amendment of Lease
Deed executed between Millenium, the Lessor and Aurosagar
Estates Pvt. Ltd. (hereinafter, “Aurosagar”), the Lessee and;
904 [2024] 9 S.C.R.
Digital Supreme Court Reports
(c) Clause 2.1.6 read with Schedule 8 on Deegee Exit where JRS
and SRG Groups are required to completely exit and AMP Group
would purchase the shares. The relevant clauses of the FAA are
reproduced hereinbelow:
“2.1.4 Exit of AMP Group from Millenium
(a) Within 30 (thirty) days from the Trigger
Date(“Millenium Transfer Date”), Parties shall execute
duly stamped agreement(s) with SRG to record and
finalize their understanding with respect to exit of AMP
Group from Millenium by way of transfer/ buy back
of all Class A equity shares in Millenium (“Millenium
Exit”) in the manner set out in Schedule 7. The Parties
agree that the valuation of Millenium for the purposes
of the Millenium Exit shall be INR 130,00,00,000
(Rupees One Hundred Thirty Crores). It is hereby
clarified that AMP Group will continue to hold Class
B equity shares in Millenium in accordance with the
provisions set out in the articles of association of
Millenium.
(b) Notwithstanding anything contained herein, Parties
shall endeavour to simultaneously undertake the
Millenium Exit and Deegee Exit on the same day
in accordance with Clause 2.1.4 and Clause 2.1.6,
respectively.
(c) Parties shall co-operate with each other for any
actions required to be undertaken or documents
required to be executed in order to give effect to the
actions contemplated under this Clause, including
but not limited to passing exercising their voting
rights to provide necessary board or shareholders’
approval, execution and stamping of share transfer
forms, endorsement of share certificates, filing forms
with the registrar of companies, making entries in
statutory registers, providing all necessary information
and documents necessary for preparing necessary
documents, etc required to be complied by Millenium
under Applicable Law.
[2024] 9 S.C.R. 905
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
2.1.5 Amendment of Aurosagar Lease Deed
(a) On the Millenium Transfer Date, Aurosagar and
Millenium shall execute a duly stamped amendment
deed to the Aurosagar Lease Deed in the format set
out in Annexure 1.
(b) Parties shall co-operate with each other for any
and all such actions required to be undertaken and
execute all such documents as may be necessary
in order to give effect to this Clause (Including
registration of the amendment deed), including but
not limited to exercising their voting rights to provide
necessary board or shareholders’ approval, attending
office of registrar of assurance for admitting the
amendment deed, providing all necessary information
and documents necessary for preparing necessary
documents, etc.
(c) All costs and expenses for amendment of the
Aurosagar Lease Deed in accordance herewith,
including without limitation, fee charged by attorneys
and other advisors/consultants, stamp duty and
registration charges shall be borne by AMP Group.
2.1.6 Exit of JRS Group and SRG from Deegee
Software
(a)Within 30 (thirty) days from the Trigger Date
(“Deegee Transfer Date”), Parties shall and
shall ensure that SRG executes duly stamped
agreement(s) to record their understanding with
regards to exit of JRS Group and SRG from Deegee
Software, including (i) transfer of all shares held by
JRS Group and SRG in Deegee Software (“AMP
Deegee Transfer”); (ii) resignation of directors
appointed by JRS Group/SRG from the board of
directors of Deegee Software; and (iii) repayment
of loan by Deegee Software to its lenders including
the interest accrued thereon in the manner set out in
Schedule 8 ((i), (ii) and (iii) are collectively referred
as “Deegee Exit”)
906 [2024] 9 S.C.R.
Digital Supreme Court Reports
(b) AMP Group shall complete due diligence of
Deegee Software within 20 (twenty) Business Days
from the Execution Date, in the event, there are any
findings requiring indemnity by AMP Group from JRS
Group and/or SRG the same will be mutually agreed
between the parties.
(c) Parties shall co-operate with each other for any
actions required to be undertaken or documents
required to be executed for giving effect to the actions
contemplated under this Clause, including but not
limited to exercising their voting rights to provide
necessary board or shareholders’ approval, execution
and stamping of share transfer forms, endorsement
of share certificates, filing forms with the registrar of
companies and the Reserve Bank of India, making
entries in statutory registers, providing all necessary
information and documents necessary for preparing
necessary documents, etc required to be complied by
Deegee Software under Applicable law. AMP Group
shall be responsible for all compliances/filings under
foreign exchange laws of India in relation to the AMP
Deegee Transfer.
xxx xxx xxx
SCHEDULE 7
MILLENIUM EXIT
In connection with Millenium Exit, the Parties have
agreed the following:
1. AMP Group will exit from Millenium. The total value
of Millenium has been fixed at INR 130,00,00,000
and AMP Group’s share of 36% out of total value of
Millenium will be INR 46,80,00,000.
2. Phase–1 - SRG will purchase approx. 11% shares
of AMP Group post receipt of Balance JRS Purchase
Price in the JRS Designated Bank Account. JRS Group
proposes to provide necessary funding to SRG for
purchasing shares held by AMP Group in Millenium.
[2024] 9 S.C.R. 907
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
3. Phase 2 - Millenium will buy back the balance
shares of AMP Group i.e., approx. 25% from the funds
to be received from Deegee Software. Any tax in
relation to such buyback to be borne by AMP Group.
4. Phase 3 - within 12 months from execution of
relevant documents in respect of Millenium Exit,
Millenium will separate out the Class “B” shares being
residential flat owners in a separate co-operative
society.
5. Until co-operative society is not formed, Millenium
will provide no objection letter to AMP Group for
transfer of their flats.
SCHEDULE 8
DEEGEE EXIT
In connection with Deegee Exit, the Parties have
agreed the following:
1. JRS Group and SRG will exit from Deegee
Software. AMP Group will discuss with Jabalpur
Group and finalise on their exit. The total value of
the property owned by Deegee Software is fixed at
INR 141,00,00,000, which shall be used to pay off
loans with proportionate interest to all lenders of
Deegee Software.
2. The sale proceeds received by AMP Group from
sale of shares as per Phase 1 of Millenium Exit, will
be brought in Deegee Software by AMP Group.
3. AMP Group will bring further funds in Deegee
Software to pay off entire loan provided by Millenium
to Deegee Software along with interest at the rate of
14.50% p.a. compounded annually.
4. Simultaneously, with repayment of loans to
Millenium as per paragraph 3 above, (i) Deegee
Software to pay off entire loan provided by JRS
Group and SRG along with interest at the rate of
14.50% p.a. compounded annually; and (ii) shares
908 [2024] 9 S.C.R.
Digital Supreme Court Reports
of Deegee Software held by JRS Group and SRG
shall also be transferred to AMP Group.
5. The above exercise to be completed within
12 months from the execution of relevant documents
in this regard.”
(Emphasis supplied)
13. Post the execution of the FAA and in pursuance of the implementation
thereof, the following communications were exchanged:
• Vide emails dated 12.03.2020 and 13.03.2020 sent to the AMP
Group, Mr. Pankaj Agarwal shared documents required for the
due diligence of Deegee which were marked to Mr. Kalpesh
Parmar and the latter email was additionally marked to the
respondent No.9 of SRG Group.
• Vide emails dated 24.04.2020 and 04.05.2020 sent to the AMP
Group, the JRS Group lawyers shared the FAA Closing Tracker
reflecting the status of implementation of the FAA which included
the pending transfer of Deegee and Millenium. The same were
marked to Mr. Kalpesh Parmar.
• Vide email dated 08.05.2020 sent to a shareholder of BVC, Mr.
Kalpesh Parmar acted as the representative of the SRG Group
on discussions pertaining to the amendment of the Aurosagar
lease deed. The said excerpt from the contents of the email
are reproduced hereinbelow:
“….On Aurosagar point, this email I am sending to
put forward views of Samarjitsinh (SRG) and not
JRS. SRG is clear that Millenium can give POA to
AMP and his immediate family and as agreed in FAA
draft, PL can work on language without disturbing
the construct / concept. SRG is not going to honour
any POA which is beyond what is stated in the draft
of POA shared with him even though you find any
logical point in AMP’s arguments. As per him AMP
is neither trustworthy nor a reliable person, so he
is not interested in dealing any further with him. He
already had a very bad experience of similar nature
when he had sealed a deal with TATAs, that time also
[2024] 9 S.C.R. 909
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
after signing the minutes, AMP took extreme U-turn
just for SRG to become a laughing stock not only
in front of all partners and HDFC Realty but also in
front of TATAs. That’s enough for him.
Please appreciate, though SRG is not a signatory to
FAA, he is ready to honour what was agreed with him
over phone call but on other side there is a person
though has signed a document is now not ready to
stick to it. Real mockery.
I would suggest that seriously you should take this
with Sanjaybhai & Shaju before approaching PI. My
hands are tied on this since I have to safeguard
interest of SRG….”
(Emphasis supplied)
• Vide email dated 11.05.2020 sent to the AMP Group on
discussions pertaining to the Aurosagar Lease deed, Mr.
Kalpesh Parmar indicated that Respondent No.9 is the only
decision maker in Millenium and JRS is at best the facilitator
if needed. The said excerpt from the contents of the email are
reproduced hereinbelow:
“…..The newly inserted points mentioned in the lease
deed vide clause nos. 2.8, 2.9 (including 2.9.1 to
2.9.4), 2.10 and 2.11 cannot be considered as part
of the draft of lease deed for following reasons:…..
…4. While your newly inserted points suggest that
they are having a futuristic impact so this can very
well be taken up in due course with Millenium when
Samarjitsinh is the only decision maker and JRS is
at best the facilitator if needed…”
(Emphasis supplied)
14. An Amendment to the FAA was executed between the AMP Group
and JRS Group on 15.05.2020. The clauses relevant to the present
dispute are reproduced hereinbelow:
“5. Clause 2.1.5(a) stands deleted in its entirety and
is substituted with the following:
910 [2024] 9 S.C.R.
Digital Supreme Court Reports
On the Millenium Transfer Date, Aurosagar and
Millenium shall simultaneously execute the following:
(i) duly stamped amendment deed to the Aurosagar
Lease Deed in the format set out in Annexure 1; (ii)
duly stamped irrevocable special power of attorney in
favour of Aurosagar in the format set out in Annexure
1A; and (iii) duly stamped deed of indemnity in the
format set out in Annexure 1B.
6. Clause 2.1.6(b) stands deleted in its entirety and
is substituted with the following:
AMP Group shall complete due diligence of Deegee
Software on or before June 30, 2020. In the event,
there are any findings requiring indemnity by AMP
Group from JRS Group and/or SRG the same will
be mutually agreed between the parties in writing.
xxx xxx xxx
12. Paragraph 27 in Schedule 4 stands deleted in its
entirety and is substituted with the following:
“Transaction Documents” means this Agreement,
the Settlement Escrow Agreement and any and
every document executed in connection with the
transaction contemplated under or in connection with
this Agreement.”
(Emphasis supplied)
15. In continuation of the implementation of the FAA, the following
communications were exchanged;
• Emails dated 01.07.2020, 10.04.2021 and 15.04.2021 were
exchanged between the AMP Group and Mr. Kalpesh Parmar
pertaining to the due diligence of Deegee.
• Vide email dated 09.10.2020 sent to the AMP Group, the JRS
lawyers shared drafts of the Share Purchase Agreements
(hereinafter, “SPAs”) pertaining to Millenium and Deegee and
a copy was marked to Mr. Kalpesh Parmar.
• Vide email dated 27.11.2020 and a reminder email dated
03.04.2021, Mr. Kalpesh Parmar sent the drafts of these SPAs
[2024] 9 S.C.R. 911
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
(with AMP Group comments) to the SRG lawyers with a copy
marked to Respondent No.9 in order to seek their comments.
• Vide email dated 26.03.2021 sent to the AMP Group with a copy
marked to the Respondent No.9, Mr. Kalpesh Parmar clarified
that though the SPAs related to Deegee was stuck up with a
non-JRS Group, yet the JRS Group was ready to hand over
the affairs of Deegee w.e.f. 01.04.2021 and requested the AMP
Group to withdraw all litigations before the concerned forums.
• Vide email dated 03.04.2021 sent to the JRS Group with a copy
marked to the Respondent No.9, the AMP Group requested
the JRS Group to undertake steps for restoring the original
shareholding of the AMP Group in Deegee.
16. Several items under the FAA were pending implementation
including the finalisation and execution of SPAs for Millenium and
Deegee at the end of the SRG Group. Therefore, vide email dated
20.12.2021 sent to the JRS Group, the AMP Group nominated Mr.
Upen Shah as the AMP Group’s representative in compliance with
clause 7.1.2 of the FAA for amicable resolution of the issues arising
out of the FAA between the AMP and JRS Groups. Vide reply email
dated 26.12.2021, the JRS Group named Mr. Sanket Jain and/or
Mr. Kalpesh Parmar as their representative. Clause 7.1.2 is
reproduced hereinbelow:
“7.1.1 The Parties agree to use all reasonable efforts to
resolve any dispute, controversy, claim or disagreement
of any kind whatsoever between or amongst any of the
Parties in connection with or arising out of this Agreement
or the Transaction Document/s executed in connection
with the transaction contemplated under or in connection
with this Agreement, including any question regarding its
existence, validity or termination (“Dispute”), expediently
and amicably to achieve timely and full performance of the
terms of this Agreement or the Transaction Document/s.
7.1.2 Any Party which claims that a Dispute has arisen
must give notice thereof to the other Parties as soon
as practicable after the occurrence of the event, matter
or thing which is the subject of such Dispute and in
such notice, such Party shall provide particulars of the
912 [2024] 9 S.C.R.
Digital Supreme Court Reports
circumstances and nature of such Dispute and of its
claim(s) in relation thereto and shall designate a Person
as its representative for negotiations relating to the
Dispute, which Person shall have authority to settle the
Dispute. The other Parties shall, within 7 (seven) days of
such notice, each specify in writing its position in relation
to the Dispute and designate as their representative in
negotiations relating to the Dispute, a Person with similar
authority.”
17. The first round of mediation was held between the representatives of
the AMP and JRS Groups on 19.01.2022. However, the discussions
on the issues did not lead to any conclusion. While the minutes of the
same were shared with Mr. Kalpesh Parmar, he denied its contents
and stated that the draft minutes do not correctly record the events
which occurred at the meeting.
18. For the purpose of initiating the second round of mediation, an email
dated 06.05.2022 was sent by the JRS Group to the AMP Group
invoking Clause 7.1.2 and they nominated Mr. Anuj Trivedi or Mr.
Kalpesh Parmar to act as their representatives. In response to the
same, on 23.05.2022, the AMP Group nominated Mr. Keyur Gandhi
and/or Mr. Upen Shah and/or Mr. Nihar Mehta as their representatives.
The first mediation meeting was convened on 13.06.2022. The second
mediation meeting was convened on 23.07.2022 wherein it was stated
by the petitioners that the AMP and JRS Groups were agreeable to
hold a joint meeting with SRG for the purpose of resolving the major
issues pertaining to Millenium and Deegee.
19. In the midst of mediation, on 17.10.2022, the JRS Group sent a
WhatsApp message to the AMP Group stating that (a) the JRS
Group had a meeting with the SRG Group, (b) SRG and Millenium
were ready to purchase the stake of AMP Group in Millenium at the
price agreed in the FAA, (c) SRG would exit from Deegee subject
to a payment of Rs. 25 crore as compensation considering its
contribution to the growth of Deegee. The contents of the message
are reproduced hereinbelow:
“Dear Keyurbhai.
My clients had a meeting with SRG and the following
points have been suggested by SRG:
[2024] 9 S.C.R. 913
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
(1) Millennium:
(a) SRG and Millennium would be ready to purchase the
stake of AMP in Millennium at the price already agreed
AMP and JRS.
(b) The said purchase would be made from the
compensation that SRG receives from AMP for handling,
taking care of and making Deegee prosperous over the
last 20 years. The said compensation would be used for
purchasing 11% of the 36% stake of AMP in Millennium.
(c) The balance 25% would be “buy back” by Millennium of
AMP shares. This would be subject to the receipt of loan
and interest by Millennium & SRG from Degee
(2) Amendment to AoA: Millennium and SRG are of the
opinion that AoA does not need to be amended
(3) Aurosagar Lease Deed: the lease of Millennium
and Aurosagar is as per the plans sanctioned by the
Municipal Corporation. The draft lease deed provided is
in contradiction to the said sanctioned plans.
(4) Aurosagar Special Power of Attorney: Millennium and
SRG are of the opinion that there is no required of a
Special Power of Attorney.
(5) Deegee
(a) SRG will exit from Deegee, however, the same has
been formed and promoted by SRG, SRG has also given
its name in order to avoid the conflict of interest of AMP
with Firmenich. SRG has taken care of the company for
the last 20 years and has provided services without any
renumeration. In view thereof, for exiting Deegee, SRG
is expecting compensation of Rs.25 crores
(b) Millennium and SRG are also expecting interest 14.50%
till repayment of the amount lent to AMP
JRS Group has suggested that we may have another
meeting and try to take it forward”.
(Emphasis supplied)
914 [2024] 9 S.C.R.
Digital Supreme Court Reports
20. Further on 21.11.2022, the JRS Group sent another WhatsApp
message to the AMP Group stating that it had spoken to the SRG
Group and that if the AMP Group was not ready to recognise SRG’s
contribution in the growth of Deegee, it would be difficult for them
to agree with the AMP Group on any point. The contents of the
message are reproduced hereinbelow:
“Talked with SRG and here is the response-
As he understands from me that AMP group is looking
forward for meeting with SRG to discuss the points
forwarded by SRG, however AMP Grp would not like to
give any compensation for Deegee to SRG. As per SRG,
if AMP Grp is not even ready to recognize his contribution
in growth of Deegee, then it would be difficult for him to
meet AMP Grp for any point and thereby the points sent
by SRG shall be considered as non existent and should
not be referred any time in future.”
(Emphasis supplied)
21. Vide email dated 16.05.2023 sent to the AMP Group, Mr. Kalpesh
Parmar conveyed that he would discuss with SRG and try to
resolve all matters pertaining to Deegee and would also intimate the
outcome of his discussion. It was also conveyed that Millenium can
be simultaneously worked out once Deegee is settled. The contents
of the email are reproduced hereinbelow:
“Dear Nihar,
Based on my discussions with JRSG, following are the
comments:
[…]
4. All Deegee points we will discuss and try to resolve with
SRG and Jabalpur Group. The outcome, we will update
you. However, we expect to complete other companies/
entities as per excel chart, which is concerning only JRSG
& AMPG, subject to the comments herein without putting
any deadlines for Deegee.
5. About Millenium, once Deegee is settled. Millenium can
be simultaneously worked out.
[2024] 9 S.C.R. 915
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
6. Escrow should be released along with the signing of
consent terms of Aurosagar.
7. As informed earlier Aurosagar’s SPOA & Lease Deed
points can be directly dealt with SRG.
You may consider above comments and discuss. You may
thereafter make necessary changes in your comments in
the excel file and resend it”.
(Emphasis supplied)
22. Since mediation between the parties yielded no result, the JRS
Group sent an Arbitration Notice dated 11.12.2023 to the AMP Group
invoking Clauses 7.2 and 7.3 respectively contained in the FAA dated
28.02.2020 read with the Amendment to the FAA dated 15.05.2020.
The JRS Group, in the said notice, alleged, inter alia, that while the
JRS Group had fulfilled its obligations under the FAA, the AMP Group
had failed to discharge and take appropriate steps in compliance of
its obligations. On account of such failure, the JRS Group was unable
to fulfil its corresponding obligations and hence, disputes had arisen
between the parties. They nominated Justice Kalpesh S. Jhaveri
(Former Chief Justice, High Court of Orissa) to act as the sole arbitrator
to resolve and adjudicate the disputes only between the AMP Group
and JRS Group, in accordance with the FAA. The arbitration clause
contained in the FAA is reproduced hereinbelow:
“7.2 Any Dispute, if not resolved in accordance with Clause
7.1, shall be referred to and finally resolved by arbitration
in accordance with the Arbitration and Conciliation Act,
1996 read with the rules framed thereunder (“Arbitration
Act”). Subject to any interim reliefs/orders granted, this
Agreement and the rights and obligations of the Parties
contained in this Agreement shall remain in full force and
effect pending issuance of the award in such arbitration
proceedings, which award, if appropriate, shall determine
whether and when any termination shall become effective.
7.3 The arbitral tribunal shall consist of a sole arbitrator
mutually agreed upon and appointed by the Parties. Failing
such agreement, either Party shall be at liberty to seek
appointment of a sole arbitrator by preferring an appropriate
application in accordance with the Arbitration Act before
916 [2024] 9 S.C.R.
Digital Supreme Court Reports
the jurisdictional Court or arbitral institution, as the case
may be, at Ahmedabad.”
23. On 12.01.2024, the AMP Group gave its reply to the aforesaid notice
and sent it to both the JRS and SRG Groups. The AMP Group, while
denying the contents of the Arbitration Notice, alleged, inter alia,
that, it is the JRS Group that had failed to perform their part of the
obligations under various pretext despite the AMP Group pursuing
the same. It stated that the assertion on the part of the JRS Group
that SRG Group was not bound by the terms of the FAA since it
is not a signatory to the said document was completely contrary to
what had been represented to AMP during the negotiations and at
the time of execution of the FAA and further the same was made
only for the purpose of raising an extra monetary demand of Rs. 25
crore which was never contemplated under the FAA. It was further
stated that Mr. Kalpesh Parmar and the JRS Group had represented
the SRG Group at all stages including the mediation process. The
appointment of Justice Akil Kureshi (Former Chief Justice, High
Court of Rajasthan) was suggested as an arbitrator for adjudication
of all disputes arising under the FAA between the AMP, JRS and
SRG Groups.
24. On 09.02.2024 and 10.02.2024 respectively, the JRS Group and
SRG Group responded to the reply to the Arbitration Notice sent by
the AMP Group.
25. Upon failure to reach an agreement on the appointment of the Sole
Arbitrator within 30 days, the Petitioner AMP Group has filed the
present Arbitration Petition No. 19 of 2024 before this Court.
B. SUBMISSIONS ON BEHALF OF THE PETITIONER (AMP
GROUP)
26. Mr. Darius Khambata, the learned senior counsel appearing on behalf
of the petitioners submitted that although the SRG Group is not a
signatory to the FAA dated 28.02.2020 which contains the arbitration
clause, yet it is a veritable party to the arbitration agreement since
they participated in the negotiations leading up to the FAA and
continued to talk with the parties on the issues pertaining to the
implementation of the FAA.
27. It was submitted that the successful implementation of the FAA was
contingent on the involvement and action of the SRG Group and it
[2024] 9 S.C.R. 917
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
was the intention and understanding of all the parties, including the
SRG Group, that they would adhere to, and act on the terms of the
FAA. The same was submitted to be evident through the following:
• The email dated 14.01.2020 by which Mr. Kalpesh Parmar stated
that the valuation of Respondent Nos. 7 and 8 respectively can
be finalized only in consultation with the SRG Group;
• A joint meeting that took place between Mr. Kalpesh Parmar,
Mr. Ashit Patel and Respondent No.9 during which Respondent
No.9 represented that Mr. Kalpesh Parmar was also representing
the interest of the SRG Group in the negotiations and that SRG
would be bound by the final terms agreed with Mr. Kalpesh
Parmar and JRS Group;
• The email dated 08.05.2020 by which Mr. Kalpesh Parmar
asserts that SRG is ready to honour what was agreed in the
FAA and that he has to safeguard the interest of SRG in the
implementation of the FAA.
• Even after the execution of the FAA, important emails dated
13.03.2020, 27.11.2020, 26.03.2021 and 03.04.2021 respectively
were sent by the JRS Group/Kalpesh Parmar wherein SRG
(Respondent No.9) was marked and has not objected to the
contents thereof or raised any grievance.
• During the mediation process, the SRG Group had communicated
through a JRS Group representative that it is ready and willing
to perform its obligations under the FAA if its demand for an
additional consideration of Rs. 25 Crore for exit from Respondent
No. 8 company is accepted by the AMP Group.
28. The Counsel submitted that the execution of the terms of the FAA
required the involvement and action of the SRG Group while also
benefitting them. It was submitted that a perusal of the following
clauses and schedules of the FAA would indicate that the transaction
was one of separation of shareholding and businesses of the three
groups viz AMP, JRS and SRG:
• Clause 2.1.4 read with Schedule 7 provides that AMP Group
would exit from Respondent No. 7 Company i.e. Millenium
(where the SRG Group already holds 40%) and that out of the
36% shares held by the AMP Group, 11% will be purchased
918 [2024] 9 S.C.R.
Digital Supreme Court Reports
by the SRG Group and the remaining 25% will be bought back
by Respondent No. 7 Company. The valuation of Respondent
No. 7 Company is provided as Rs. 130 crore.
• Clause 2.1.6 read with Schedule 8 provides that the JRS and
SRG Groups shall exit the Respondent No. 8 Company i.e.
Deegee by selling their shares to the AMP Group. Sale proceeds
received by the AMP Group on its exit from the Respondent
No. 7 company will be brought into the Respondent No. 8
Company. The valuation of Respondent No. 8 Company is
provided as Rs. 141 Crore.
• Clause 2.1.7 read with Item 10 of Schedule 3 provides that
the AMP Group shall withdraw CP 383/2017 filed against the
Respondent No. 8 Company where Respondent No.9 is also
a party.
29. The counsel submitted that the Share Purchase Agreements (SPAs)
were to be executed to facilitate the implementation of Clauses 2.1.4
and 2.1.6 respectively of the FAA and the SRG Group would have
been a party to the SPAs. This is evident from the draft SPAs and
the same were forwarded specifically to the respondent No.9 vide
email dated 27.11.2020. That according to the dispute resolution
clause contained in Clauses 7.1 and 7.2 respectively, disputes
between or amongst any of the parties in connection with or arising
out of the Transaction Documents can be amicably resolved and
upon its failure, be resolved by arbitration. The term “Transaction
Documents” is defined as “means this Agreement, the Escrow
Agreement and any and every document executed in connection
with the transaction contemplated under or in connection with this
Agreement” and also includes the SPAs to be executed inter alia
the SRG Group, the drafts of which were forwarded to the SRG
Group on 27.11.2020.
30. It was submitted that the AMP Group has conducted the due diligence
of the Respondent No.8 Company i.e., Deegee as contemplated
in Clause 2.1.6(b) of the FAA with the full knowledge and consent
of the SRG Group. The same is evident vide emails dated
01.07.2020, 23.10.2020, 10.04.2021 and 15.04.2021 respectively.
This demonstrated that the FAA had also been partly implemented
qua the SRG Group which is in management of the said company.
[2024] 9 S.C.R. 919
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
31. One another submission made by the counsel was that the
nomenclature of the agreement i.e., “Family Arrangement Agreement”
is irrelevant. In addition to that, the description and obligation of the
parties under the FAA is also irrelevant since most cases of non-
signatory parties will involve agreements, the terms of which do
not expressly include the non-signatory. In support of the aforesaid,
the counsel placed reliance on the decision of this Court in Sasan
Power Ltd. v. North American Coal Corporation (India) Private
Ltd. reported in (2016) 10 SCC 813 where it was settled that the
nomenclature of an agreement is not determinative of its character.
32. The counsel submitted that while on many occasions the
representatives of JRS Group were there to take care of the interests,
suggestions and comments of the SRG Group, it was understood by
all the parties that the SRG Group although not a signatory to the
FAA yet would be a part of the execution of and compliance of the
terms and conditions thereof. Therefore, there was commonality of
subject matter and composite transactions, in view of which SRG is
a veritable party liable to be referred to arbitration.
33. By placing a strong reliance on the decision of this Court in Cox and
Kings Ltd. v. SAP India Pvt. Ltd. reported in (2024) 4 SCC 1, the
counsel submitted that the settled position is that the referral court
should leave it for the Arbitral Tribunal to decide whether the non-
signatory party is indeed a party to the arbitration agreement on the
basis of factual evidence and application of legal doctrine. He submitted
that the Delhi and Bombay High Courts have consistently taken a
view to refer the parties, including the non-signatories to arbitration
in DLF Ltd. v. PNB Housing Finance Ltd. reported in (2024) SCC
OnLine Del 2165, Moneywise Financial Services (P) Ltd. v. Dilip
Jain reported in (2024) SCC OnLine Del 1896 and Cardinal Energy
and Infra Structure Pvt. Ltd. v. Subramanya Construction &
Development Co. Ltd. reported in (2024) SCC OnLine Bom 964
by relying on this Court’s decision in Cox and Kings (supra).
34. The counsel finally submitted that it is critical to refer even the non-
signatory to arbitration since otherwise there is a risk that the non-
signatory may not appear before the Arbitral Tribunal and disregard
its award as beyond jurisdiction. In any event, the arbitrability of
disputes qua the SRG Group can always be considered by the
Arbitral Tribunal.
920 [2024] 9 S.C.R.
Digital Supreme Court Reports
C. SUBMISSIONS ON BEHALF OF THE RESPONDENT (JRS
GROUP)
35. Ms. Anushree Prashit Kapadia the learned counsel appearing on behalf
of the Respondent JRS Group submitted that while the JRS Group
has no objection to the adjudication of disputes with the AMP Group
by arbitral proceedings presided by the Sole arbitrator nominated by
the AMP Group, the SRG Group cannot be a part of the arbitration
proceedings as they are not party to the FAA. It was also submitted
that the FAA contained the definition of “Parties” and the SRG Group
is not defined in the FAA. The AMP Group and JRS Group are family
members, whereas, the SRG Group is not part of the family.
36. The counsel submitted that the various clauses of the FAA indicate
that the FAA binds only the AMP and JRS Groups. Clauses 2.1.4
and 2.1.6 respectively wherein the SRG Group is mentioned do not
cast any obligations on the SRG Group since it merely states that
“Parties shall execute…” & “Parties shall ensure...”. There is also no
exchange of consideration with the SRG Group in the FAA.
37. The counsel submitted that neither the JRS Group nor the chartered
accountant, Mr. Kalpesh Parmar have ever represented the SRG
Group, acted on their behalf or received any authority or power
from the SRG Group. There is no evidence on record or otherwise
to the contrary.
38. The counsel submitted that Clause 8.1 of the FAA on “Entire
Agreement” categorically states that the FAA superseded any and
all prior oral and written agreements. Therefore, the case of the AMP
Group that SRG Group was effectively a part of the negotiations and
is privy to the transactions is inconsequential.
39. The counsel finally submitted that the AMP Group and JRS Group
have fulfilled part of their respective obligations under the FAA and
are in a position to fully execute the FAA without the presence or role
of the SRG Group. Clause 8.7 dealing with Partial Validity empowers
the severance of invalid or unenforceable provisions of the FAA.
D. SUBMISSIONS ON BEHALF OF THE RESPONDENT (SRG
GROUP)
40. Mr. Huzefa Ahmadi, the learned senior counsel appearing on behalf
of the Respondent SRG Group submitted that the present petition
[2024] 9 S.C.R. 921
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
is merely a device to embroil strangers into an agreement entered
into between two groups of the same family since the SRG Group
is admittedly neither a party nor signatory or confirming party to the
FAA or the alleged arbitration agreement contained therein. The AMP
and JRS Groups who are signatories thereto are ad idem about the
terms of the FAA, including their mutual intention to refer the disputes
arising from it to arbitration. Had the SRG Group been involved in
the negotiations leading to the signing of the FAA, or participated
therein, or expressed its inclination to be bound by the arbitration
agreement, the same would have been recorded in the FAA.
41. The counsel submitted that the fact that the FAA had always been
intended to operate inter se the AMP and JRS Groups is borne from
a bare perusal of the clauses of the FAA itself which only confers
rights or fastens obligations upon the said Groups.
• Recital F specifically records that the AMP and JRS Groups
“after mutual discussions and negotiations have agreed to settle
all disputes/issues that have arisen amongst the parties over
last several years …. on the terms and conditions as mutually
agreed to”.
• Clauses 2.1.4 and 2.1.6 read with Schedules 7 and 8 which
relate to the exit of AMP Group from Millenium and the exit of
JRS and SRG Groups from Deegee contain a mere reference
to the SRG Group wherein the foremost words used read as
“In connection with the … Exit, the Parties agree…” – thereby
placing the obligation to exit and/or ensure such exit solely
upon the AMP or JRS Groups, as the case may be. None of
these clauses indicate either the consent or agreement of the
SRG Group in this regard.
• Further, in Clause 2.1.7, the FAA places an obligation to
unconditionally withdraw all litigations solely on the AMP and
JRS Groups.
42. The counsel submitted that the arbitration clause contained in the FAA
by itself makes a reference only to the parties to the FAA inasmuch
as it sets out the negotiation or dispute resolution mechanism or
appointment procedure to be followed by the parties alone, and
importantly, the factum that the AMP and JRS Groups shall continue
to perform their respective obligations under the FAA, subject to the
922 [2024] 9 S.C.R.
Digital Supreme Court Reports
termination of the FAA. At no point does the arbitration agreement
make any reference to the SRG Group nor does it fasten any
obligations to be performed by it.
43. It was further submitted that there is no defined legal relationship
between the SRG Group and the petitioners to justify the application
of Section 7(1) of the Act, 1996. In other words, there is no ‘arbitration
agreement’ between them either in the form of an arbitration clause
in a contract or in the form of a separate agreement in terms of sub-
sections (2) to (5) of section 7 of the Act, 1996. In fact, there is no
contract at all between them and consequently, there is no privity
of contract between the Petitioners and SRG Group in any manner
whatsoever.
44. It was also submitted that bringing non-signatories within the scope
of the arbitration agreement is an exception and not the rule. In
support of this, the counsel relied on the decision of this Court in
Cox & Kings (supra). Further, it was submitted that a dual test has
to be satisfied to compel the SRG Group to be a party to the present
arbitration proceedings i.e., (a) SRG Group should be shown to have
agreed to the underlying contract and (b) SRG Group should also
be shown to have agreed to be bound by the arbitration agreement.
Both the conditions are not satisfied. A vague awareness of the
JRS and AMP Groups being in negotiations or the mere marking of
emails relating thereto to a member of the SRG Group cannot imply
consent. It was submitted that the SRG Group is neither a consensual
or non-consensual participant in the arbitration proceedings arising
out of the FAA nor have any of the aforementioned consensual or
non-consensual theories been invoked by the petitioners. To compel
a party to arbitration in respect of a family arrangement despite the
fact that they are not a member of the family would sound the death
knell to the concept of party autonomy and freedom of contract.
45. The counsel submitted that apart from co-ownership or common
shareholding in Millenium and Deegee, the SRG Group has no
business relationship or dealings or common interest with either of
the other groups. Since the subject-matter in question is with respect
to the implementation of the FAA, there is no doubt that the same
can be effectively implemented without the participation of the SRG
Group in the arbitration proceedings. Without prejudice to the above,
the counsel submitted that severing the only two sub-clauses that
[2024] 9 S.C.R. 923
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
merely make a reference to the SRG Group, without placing any
obligation thereupon i.e., Clauses 2.1.4 and 2.1.6 would in no way
impact the implementation of the FAA.
46. It was submitted that the negotiations leading to the signing of the
FAA were initiated at the behest of one Premji Group in the BVC
deal that took place between the Premji Group, the JRS Group and
other shareholders. Surprisingly, despite disputes having arisen
regarding a similar exit of the JRS Group from BVC, neither BVC
nor the Premji Group have been roped in as participants in the
FAA. However, the AMP Group, for reasons best known to itself,
has sought participation of the SRG Group on the feeble pretext of
ensuring exits from Millenium and Deegee.
47. The counsel also submitted that the SRG Group was not a party to
the mediation proceedings since vide email dated 20.12.2021, the
AMP Group invoked mediation as per clause 7.1.2 of the FAA only
against the JRS Group for resolving disputes between themselves.
It has been admitted in the same email that the AMP Group had
no contact with the SRG Group regarding any SPAs for Millenium
and Deegee or otherwise and the AMP Group even castigated the
JRS Group for pushing pending obligations inter se the parties on
the SRG Group when “the SRG group is not even a party to the
FAA”. The minutes of the 1st mediation meeting dated 19.01.2022
also reflect that the same was not attended by the members or
representatives of the SRG Group. The counsel further submitted
that when the negotiations were resumed for the second time vide
email dated 23.05.2022, the SRG Group neither attended nor was
represented in the same.
48. The counsel submitted that the SRG Group at no point of time,
appointed, engaged or authorised, either the JRS Group or
Mr. Kalpesh Parmar to undertake any actions or make any
representations on its behalf or bind it to any agreement that has
been entered into by and between the AMP and JRS Groups either
expressly or impliedly. It was submitted that even as per the petitioners’
own case, the so called joint meeting dated 14.01.2020 that was
arranged by Mr. Kalpesh Parmar was done so by him representing
the JRS Group and “was attended by Mr. Ashit Patel for AMP Group
and Respondent No.9 of the SRG Group”. Therefore, the petitioners
cannot blow hot and cold and allege that Mr. Parmar also attended in
924 [2024] 9 S.C.R.
Digital Supreme Court Reports
the capacity of a representative of the SRG Group. Further, the JRS
Group itself nominated Mr. Kalpesh Parmar as its representative for
mediation vide email dated 26.12.2021 and therefore, it is not proper
for the petitioners to contend that the SRG Group was represented
by Mr. Kalpesh Parmar or the JRS Group.
49. The counsel submitted that the Notice invoking arbitration sent
by the JRS Group on 11.12.2023 was not addressed to the SRG
Group. Only in the Reply to the Arbitration Notice issued by the AMP
Group on 12.01.2024, the SRG Group was marked and this is the
first instance that the AMP Group alluded to the SRG Group as a
participant in the FAA and that to after a span of almost 4 years.
This, according to him, was clearly an afterthought.
50. The counsel in the last submitted that, in the facts of the present
case, even the prima facie threshold required to be met to warrant
joinder of non-parties to arbitral proceedings, either by the referral
court or by an arbitral tribunal, has not been met.
E. ANALYSIS
51. Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the only question that
falls for our consideration is whether the SRG Group, being a non-
signatory to the FAA, should also be referred to arbitration along
with the AMP and JRS Groups?
i. Scope of jurisdiction of the referral court under Section
11(6) of the Act, 1996
52. A plethora of decisions have deliberated upon the scope of the
Court’s jurisdiction and the role to be played by the referral court
in the appointment of an arbitrator. The position on this question
was starkly different prior to and post the 2015 Amendment to the
1996, Act.
53. A seven-Judge Bench of this Court in SBP & Co. v. Patel Engg. Ltd.
reported in (2005) 8 SCC 618, held that the power under Section 11
of the Act, 1996 was not an administrative but a judicial power.
Therefore, it was opined that the Chief Justice or his designate under
Section 11(6) had the right to decide preliminary issues including
his own jurisdiction, to entertain the request, the existence of a valid
[2024] 9 S.C.R. 925
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
arbitration agreement, the existence or otherwise of a live claim, the
existence of the condition for the exercise of his power and on the
qualifications of the arbitrator or arbitrators. The relevant observations
are reproduced hereinbelow:
“47. We, therefore, sum up our conclusions as follows:
(i) The power exercised by the Chief Justice of the High
Court or the Chief Justice of India under Section 11(6) of
the Act is not an administrative power. It is a judicial power.
xxx xxx xxx
(iv) The Chief Justice or the designated Judge will have
the right to decide the preliminary aspects as indicated
in the earlier part of this judgment. These will be his own
jurisdiction to entertain the request, the existence of a
valid arbitration agreement, the existence or otherwise of
a live claim, the existence of the condition for the exercise
of his power and on the qualifications of the arbitrator or
arbitrators. The Chief Justice or the designated Judge
would be entitled to seek the opinion of an institution in
the matter of nominating an arbitrator qualified in terms
of Section 11(8) of the Act if the need arises but the order
appointing the arbitrator could only be that of the Chief
Justice or the designated Judge.
xxx xxx xxx
(ix) In a case where an Arbitral Tribunal has been
constituted by the parties without having recourse to
Section 11(6) of the Act, the Arbitral Tribunal will have
the jurisdiction to decide all matters as contemplated by
Section 16 of the Act.
xxx xxx xxx
(xii) … The decision in Konkan Rly. Corpn. Ltd. v. Rani
Construction (P) Ltd. [(2002) 2 SCC 388] is overruled.
(Emphasis supplied)
54. While further reinforcing the view taken in SBP & Co. (supra),
this Court in National Insurance Company Limited v. Boghara
926 [2024] 9 S.C.R.
Digital Supreme Court Reports
Polyfab Private Ltd reported in (2009) 1 SCC 267 identified and
segregated the three categories of preliminary issues that may arise
for consideration in an application under Section 11 as follows:
“22. Where the intervention of the court is sought for
appointment of an Arbitral Tribunal under Section 11,
the duty of the Chief Justice or his designate is defined
in SBP & Co. [(2005) 8 SCC 618] This Court identified
and segregated the preliminary issues that may arise for
consideration in an application under Section 11 of the Act
into three categories, that is, (i) issues which the Chief
Justice or his designate is bound to decide; (ii) issues
which he can also decide, that is, issues which he may
choose to decide; and (iii) issues which should be left to
the Arbitral Tribunal to decide.
22.1. The issues (first category) which the Chief Justice/
his designate will have to decide are:
(a) Whether the party making the application has
approached the appropriate High Court.
(b) Whether there is an arbitration agreement and whether
the party who has applied under Section 11 of the Act, is
a party to such an agreement.
22.2. The issues (second category) which the Chief Justice/
his designate may choose to decide (or leave them to the
decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-barred) claim or a
live claim.
(b) Whether the parties have concluded the contract/
transaction by recording satisfaction of their mutual rights
and obligation or by receiving the final payment without
objection.
22.3. The issues (third category) which the Chief Justice/
his designate should leave exclusively to the Arbitral
Tribunal are:
(i) Whether a claim made falls within the arbitration clause
(as for example, a matter which is reserved for final decision
[2024] 9 S.C.R. 927
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
of a departmental authority and excepted or excluded
from arbitration).
(ii) Merits or any claim involved in the arbitration.
(Emphasis supplied)
55. On a closer look at the categories delineated in the aforesaid
decision, it can be seen that the issues in the first category have to
be mandatorily decided by the Chief Justice or his designate under
Section 11 of the Act, 1996. This included the question whether there
is an arbitration agreement and whether the party that has applied
under Section 11 is also a party to such an agreement.
56. Later, on the suggestion of the 246th Report of the Law Commission
of India, Section 11(6A) was inserted through the 2015 Amendment
to the Act, 1996. The wide jurisdiction afforded to the referral courts
by the decisions in SBP & Co (supra) and Boghara Polyfab (supra)
was legislatively overruled by virtue of the non-obstante clause
incorporated in Section 11(6A). Although the 2019 Amendment to the
Act, 1996 omitted Section 11(6A), such an omission was not notified
and therefore Section 11(6A) still remains in force and reads thus:
“(6A) The Supreme Court or, as the case may be, the
High Court, while considering any application Under Sub-
section (4) or Sub-section (5) or Sub-section (6), shall,
notwithstanding any judgment, decree or order of any
Court, confine to the examination of the existence of an
arbitration agreement.”
(Emphasis supplied)
57. The crucial question that arose for consideration by this Court in
Duro Felguera S.A. v. Gangavaram Port Limited reported in
(2017) 9 SCC 729 was the effect of the change introduced by the
2015 Amendment to the Act, 1996 which inserted Section 11(6A).
The Court held that all that needs to be looked into is whether the
agreement contained a Clause which provides for arbitration pertaining
to the disputes which have arisen between the parties to the agreement
i.e., the existence of the arbitration agreement, nothing more, nothing
less. The relevant observations are extracted hereinbelow:
“48[…] From a reading of Section 11(6-A), the intention
of the legislature is crystal clear i.e. the court should
928 [2024] 9 S.C.R.
Digital Supreme Court Reports
and need only look into one aspect—the existence of an
arbitration agreement. What are the factors for deciding
as to whether there is an arbitration agreement is the next
question. The resolution to that is simple—it needs to be
seen if the agreement contains a clause which provides
for arbitration pertaining to the disputes which have arisen
between the parties to the agreement.
xxx xxx xxx
59. The scope of the power under Section 11(6) of the
1996 Act was considerably wide in view of the decisions
in SBP and Co. [SBP and Co. v. Patel Engg. Ltd. (2005)
8 SCC 618] and Boghara Polyfab [National Insurance
Co. Ltd. v. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267 :
(2009) 1 SCC (Civ) 117] . This position continued till the
amendment brought about in 2015. After the amendment,
all that the courts need to see is whether an arbitration
agreement exists—nothing more, nothing less. The
legislative policy and purpose is essentially to minimise the
Court’s intervention at the stage of appointing the arbitrator
and this intention as incorporated in Section 11(6-A) ought
to be respected.
(Emphasis supplied)
58. A two Judge-Bench of this Court in Garware Wall Ropes Ltd. v.
Coastal Marine Constructions & Engineering Ltd. reported in
(2019) 9 SCC 209 considered the effect of Section 11(6A) which
confined the jurisdiction of the Court to examine the “existence of
an arbitration agreement” on an arbitration agreement contained in
an unstamped document or contract. The Court was of the opinion
that its enquiry as to whether a compulsorily stampable document,
which contains the arbitration clause, is duly stamped or not, is only
an enquiry into whether such an arbitration agreement exists in law
and this does not in any manner amount to deciding “preliminary
question(s)” that arise between the parties. However, in deciding so,
the Court maintained that a referral court must confine itself to the
question of existence of the arbitration agreement and observed as thus:
“14. A reading of the Law Commission Report, together
with the Statement of Objects and Reasons, shows that
[2024] 9 S.C.R. 929
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
the Law Commission felt that the judgments in SBP & Co.
[SBP & Co. v. Patel Engg. Ltd. (2005) 8 SCC 618] and
Boghara Polyfab [National Insurance Co. Ltd. v. Boghara
Polyfab (P) Ltd. (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]
required a relook, as a result of which, so far as Section 11
is concerned, the Supreme Court or, as the case may be,
the High Court, while considering any application under
Sections 11(4) to 11(6) is to confine itself to the examination
of the existence of an arbitration agreement and leave all
other preliminary issues to be decided by the arbitrator. […]”
(Emphasis supplied)
59. Once again, a three-judge bench of this Court in Vidya Drolia and
Ors. v. Durga Trading Corporation reported in (2021) 2 SCC 1 held
that Sections 8 and 11 respectively must be read as laying down a
similar standard on the scope of the referral court’s powers. It was
stated that the questions as regards the existence and validity being
intertwined, an arbitration agreement does not exist if it is illegal or
does not satisfy mandatory legal requirements. The decision endorsed
the application of a prima facie test in examining the existence and
validity of an arbitration agreement both under Sections 8 and 11. This
prima facie examination was not a full review but a primary first review
to weed out manifest and ex-facie non-existent and invalid arbitration
agreements and non-arbitrable disputes. However, it was clarified
that the Court should not get lost in thickets and decide debatable
questions of fact. The relevant extract is reproduced hereinbelow:
“153. Accordingly, we hold that the expression “existence
of an arbitration agreement” in Section 11 of the Arbitration
Act, would include aspect of validity of an arbitration
agreement, albeit the court at the referral stage would apply
the prima facie test on the basis of principles set out in
this judgment. In cases of debatable and disputable facts,
and good reasonable arguable case, etc., the court would
force the parties to abide by the arbitration agreement as
the Arbitral Tribunal has primary jurisdiction and authority
to decide the disputes including the question of jurisdiction
and non-arbitrability.”
(Emphasis Supplied)
930 [2024] 9 S.C.R.
Digital Supreme Court Reports
60. Vidya Drolia (supra) while speaking in the context of Section 8 also
pointed out that jurisdictional issues like whether certain parties are
bound by the arbitration agreement must be left to the arbitral tribunal
since they involve complicated factual questions and observed as
thus:
“239. […] Jurisdictional issues concerning whether certain
parties are bound by a particular arbitration, under group-
company doctrine or good faith, etc., in a multi-party
arbitration raises complicated factual questions, which are
best left for the tribunal to handle.[…]”
(Emphasis supplied)
61. A Constitution Bench of this Court in In Re: Interplay Between
Arbitration Agreements under Arbitration and Conciliation
Act, 1996 and Stamp Act, 1899 reported in (2024) 6 SCC 1,
stated that an arbitration agreement contained in an unstamped or
insufficiently stamped contract would not be non-existent in law as
stated in Garware Wall Ropes (supra). It also clarified the position
taken in Vidya Drolia (supra) and stated that the parameters for
judicial review under Sections 8 and 11 respectively were different.
The scope of examination under Section 11(6) should be confined
to the “existence of the arbitration agreement” under Section 7 of
the Act, 1996. Similarly, the “validity of an arbitration agreement”
must be restricted to the requirement of formal validity such as the
requirement that the agreement be in writing. Substantive objections
pertaining to existence and validity on the basis of evidence must
therefore be left to the arbitral tribunal. Moreover, it was stated that
the expression “examination” under Section 11 does not connote or
imply a laborious or contested inquiry. On the other hand, Section 16
provides that the arbitral tribunal can “rule” on its jurisdiction,
including the existence and validity of an arbitration agreement. It
was also stated that any prima facie opinion rendered by the Court
under Section 11 need not bind the arbitral tribunal. The relevant
observations are extracted hereinbelow:
“164. The 2015 Amendment Act has laid down different
parameters for judicial review under Section 8 and
Section 11. Where Section 8 requires the Referral Court
to look into the prima facie existence of a valid arbitration
agreement, Section 11 confines the Court’s jurisdiction
[2024] 9 S.C.R. 931
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
to the examination of the existence of an arbitration
agreement. Although the object and purpose behind both
Sections 8 and 11 is to compel parties to abide by their
contractual understanding, the scope of power of the
Referral Courts under the said provisions is intended to
be different. The same is also evident from the fact that
Section 37 of the Arbitration Act allows an appeal from the
order of an Arbitral Tribunal refusing to refer the parties
to arbitration under Section 8, but not from Section 11.
Thus, the 2015 Amendment Act has legislatively overruled
the dictum of Patel Engg. [SBP & Co. v. Patel Engg. Ltd.
(2005) 8 SCC 618] where it was held that Section 8 and
Section 11 are complementary in nature. Accordingly, the two
provisions cannot be read as laying down a similar standard.
165. The legislature confined the scope of reference under
Section 11(6-A) to the examination of the existence of an
arbitration agreement. The use of the term “examination”
in itself connotes that the scope of the power is limited to
a prima facie determination. Since the Arbitration Act is a
self-contained code, the requirement of “existence” of an
arbitration agreement draws effect from Section 7 of the
Arbitration Act. In Duro Felguera [Duro Felguera, S.A. v.
Gangavaram Port Ltd. (2017) 9 SCC 729 : (2017) 4 SCC
(Civ) 764] , this Court held that the Referral Courts only
need to consider one aspect to determine the existence
of an arbitration agreement — whether the underlying
contract contains an arbitration agreement which provides
for arbitration pertaining to the disputes which have arisen
between the parties to the agreement. Therefore, the
scope of examination under Section 11(6-A) should be
confined to the existence of an arbitration agreement on
the basis of Section 7. Similarly, the validity of an arbitration
agreement, in view of Section 7, should be restricted to the
requirement of formal validity such as the requirement that
the agreement be in writing. This interpretation also gives
true effect to the doctrine of competence-competence by
leaving the issue of substantive existence and validity of
an arbitration agreement to be decided by Arbitral Tribunal
under Section 16. We accordingly clarify the position of law
932 [2024] 9 S.C.R.
Digital Supreme Court Reports
laid down in Vidya Drolia [Vidya Drolia v. Durga Trading
Corpn. (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] in the
context of Section 8 and Section 11 of the Arbitration Act.
166. The burden of proving the existence of arbitration
agreement generally lies on the party seeking to rely on
such agreement. In jurisdictions such as India, which
accept the doctrine of competence-competence, only prima
facie proof of the existence of an arbitration agreement
must be adduced before the Referral Court. The Referral
Court is not the appropriate forum to conduct a mini-trial
by allowing the parties to adduce the evidence in regard to
the existence or validity of an arbitration agreement. The
determination of the existence and validity of an arbitration
agreement on the basis of evidence ought to be left to the
Arbitral Tribunal. This position of law can also be gauged
from the plain language of the statute.
167. Section 11(6-A) uses the expression “examination
of the existence of an arbitration agreement”. The
purport of using the word “examination” connotes that
the legislature intends that the Referral Court has to
inspect or scrutinise the dealings between the parties
for the existence of an arbitration agreement. Moreover,
the expression “examination” does not connote or imply
a laborious or contested inquiry. [ P. Ramanatha Aiyar,
The Law Lexicon (2nd Edn., 1997) 666.] On the other
hand, Section 16 provides that the Arbitral Tribunal can
“rule” on its jurisdiction, including the existence and
validity of an arbitration agreement. A “ruling” connotes
adjudication of disputes after admitting evidence from
the parties. Therefore, it is evident that the Referral Court
is only required to examine the existence of arbitration
agreements, whereas the Arbitral Tribunal ought to rule
on its jurisdiction, including the issues pertaining to the
existence and validity of an arbitration agreement.[…]
xxx xxx xxx
169. When the Referral Court renders a prima facie opinion,
neither the Arbitral Tribunal, nor the Court enforcing the
arbitral award will be bound by such a prima facie view.
[2024] 9 S.C.R. 933
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
If a prima facie view as to the existence of an arbitration
agreement is taken by the Referral Court, it still allows
the Arbitral Tribunal to examine the issue in depth. Such
a legal approach will help the Referral Court in weeding
out prima facie non-existent arbitration agreements. It will
also protect the jurisdictional competence of the Arbitral
Tribunals to decide on issues pertaining to the existence
and validity of an arbitration agreement.”
(Emphasis supplied)
62. This very Bench in SBI General Insurance Co. Ltd. v. Krish
Spinning reported in (2024) SCC OnLine SC 1754 dealt with the
scope and standard of judicial scrutiny in an application made under
Section 11(6) of the Act, 1996 specifically when a plea of “accord
and satisfaction” is taken by the defendant. It was observed that in
a scenario where the Courts delve into the domain of the arbitral
tribunal at the Section 11 stage and reject the application, there is
a risk of leaving the claimant forum-less for the adjudication of its
claims. It was stated that a detailed examination at this stage would
also be counterproductive to the objective of expediency in deciding
a Section 11 application and simplification of pleadings. It was
also stated that even if ex-facie frivolity is made out by the referral
court, the arbitral tribunal has the benefit of extensive pleadings and
evidentiary material and therefore, it would be incorrect to doubt that
the arbitral tribunal would not be able to arrive at a similar conclusion.
The relevant observations are reproduced hereinbelow:
“123. The power available to the referral courts has to be
construed in the light of the fact that no right to appeal is
available against any order passed by the referral court
under Section 11 for either appointing or refusing to appoint
an arbitrator. Thus, by delving into the domain of the arbitral
tribunal at the nascent stage of Section 11, the referral courts
also run the risk of leaving the claimant in a situation wherein
it does not have any forum to approach for the adjudication
of its claims, if it Section 11 application is rejected.
124. Section 11 also envisages a time-bound and
expeditious disposal of the application for appointment of
arbitrator. One of the reasons for this is also the fact that
unlike Section 8, once an application under Section 11 is
934 [2024] 9 S.C.R.
Digital Supreme Court Reports
filed, arbitration cannot commence until the arbitral tribunal
is constituted by the referral court. This Court, on various
occasions, has given directions to the High Courts for
expeditious disposal of pending Section 11 applications.
It has also directed the litigating parties to refrain from
filing bulky pleadings in matters pertaining to Section 11.
Seen thus, if the referral courts go into the details of issues
pertaining to “accord and satisfaction” and the like, then it
would become rather difficult to achieve the objective of
expediency and simplification of pleadings.
125. We are also of the view that ex-facie frivolity and
dishonesty in litigation is an aspect which the arbitral
tribunal is equally, if not more, capable to decide upon the
appreciation of the evidence adduced by the parties. We
say so because the arbitral tribunal has the benefit of going
through all the relevant evidence and pleadings in much
more detail than the referral court. If the referral court is
able to see the frivolity in the litigation on the basis of bare
minimum pleadings, then it would be incorrect to doubt that
the arbitral tribunal would not be able to arrive at the same
inference, most likely in the first few hearings itself, with the
benefit of extensive pleadings and evidentiary material.”
(Emphasis supplied)
63. The recent Constitution Bench decision of this Court in Cox and
Kings Limited v. SAP India Private Limited and Another reported
in (2024) 4 SCC 1, specifically dealt with the question of impleading
a non-signatory as a party in the arbitration proceedings and the
corresponding scope of enquiry at the referral stage. It was held
therein that Section 16 is an inclusive provision which comprehends all
preliminary issues touching upon the jurisdiction of the arbitral tribunal
and the issue of determining parties to an arbitration agreement
goes to the very root of the jurisdictional competence of the arbitral
tribunal. The relevant observations are reproduced hereinbelow:
163. Section 16 of the Arbitration Act enshrines the principle
of competence-competence in Indian arbitration law. The
provision empowers the Arbitral Tribunal to rule on its own
jurisdiction, including any ruling on any objections with
respect to the existence or validity of arbitration agreement.
[2024] 9 S.C.R. 935
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
Section 16 is an inclusive provision which comprehends
all preliminary issues touching upon the jurisdiction of
the Arbitral Tribunal. [Uttarakhand Purv Sainik Kalyan
Nigam Ltd. v. Northern Coal Field Ltd. (2020) 2 SCC 455 :
(2020) 1 SCC (Civ) 570] The doctrine of competence-
competence is intended to minimise judicial intervention
at the threshold stage. The issue of determining parties
to an arbitration agreement goes to the very root of the
jurisdictional competence of the Arbitral Tribunal.
xxx xxx xxx
169. In case of joinder of non-signatory parties to an
arbitration agreement, the following two scenarios will
prominently emerge : first, where a signatory party to an
arbitration agreement seeks joinder of a non-signatory
party to the arbitration agreement; and second, where a
non-signatory party itself seeks invocation of an arbitration
agreement. In both the scenarios, the referral court will
be required to prima facie rule on the existence of the
arbitration agreement and whether the non-signatory is
a veritable party to the arbitration agreement. In view
of the complexity of such a determination, the referral
court should leave it for the Arbitral Tribunal to decide
whether the non-signatory party is indeed a party to the
arbitration agreement on the basis of the factual evidence
and application of legal doctrine. The Tribunal can delve
into the factual, circumstantial, and legal aspects of the
matter to decide whether its jurisdiction extends to the
non-signatory party. In the process, the Tribunal should
comply with the requirements of principles of natural justice
such as giving opportunity to the non-signatory to raise
objections with regard to the jurisdiction of the Arbitral
Tribunal. This interpretation also gives true effect to the
doctrine of competence-competence by leaving the issue
of determination of true parties to an arbitration agreement
to be decided by the Arbitral Tribunal under Section 16.
170. In view of the discussion above, we arrive at the
following conclusions:
xxx xxx xxx
936 [2024] 9 S.C.R.
Digital Supreme Court Reports
(170.12) At the referral stage, the referral court should
leave it for the Arbitral Tribunal to decide whether the
non-signatory is bound by the arbitration agreement […]”
(Emphasis supplied)
64. Therefore, on the pivotal issue whether the non-signatories can be
referred to arbitration, this Court took the view that the referral court
is required to prima facie rule on the existence of the arbitration
agreement and whether the non-signatory party is a veritable party
to the arbitration agreement. However, recognising the complexity of
such a determination, the arbitral tribunal was considered the proper
forum since it can decide whether the non-signatory is a party to the
arbitration agreement on the basis of factual evidence and application
of legal doctrine. In this process, the non-signatory must also be given
an opportunity to raise objections regarding the jurisdiction of the
arbitral tribunal in accordance with the principles of natural justice.
65. The position of law that emerges from the aforesaid discussion can
be summarized as follows;
• SBP & Co. (supra) expanded the scope of the Court’s power
under Section 11 while empowering the referral courts to decide
several preliminary issues. Boghara Polyfab (supra) went to
the extent of identifying three categories of preliminary issues
that may arise for consideration in an application under Section
11. Of these, in the first category which had to be mandatorily
decided by the referral Court, the question whether there
was an arbitration agreement and whether the party who has
applied under Section 11 of the Act, 1996 is a party to such an
agreement, was also included.
• The insertion of Section 11(6A) through the 2015 Amendment
to the Act, 1996 stipulated that the Courts under Section 11
shall confine their examination to the ‘existence’ of an arbitration
agreement. It legislatively overruled the decisions in SBP &
Co. (supra) and Boghara Polyfab (supra) by virtue of its non-
obstante clause.
• Duro Felguera (supra), in clear terms, clarified the effect of the
change brought in by Section 11(6A) and stated that all that
the Courts need to see is whether an arbitration agreement
exists - nothing more, nothing less.
[2024] 9 S.C.R. 937
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
• Vidya Drolia (supra) endorsed the prima facie test in examining
the existence and validity of an arbitration agreement both under
Sections 8 and 11 respectively. However, it was clarified that in
cases of debatable and disputable facts and reasonably good
arguable case, etc. the Court may refer the parties to arbitration
since the arbitral tribunal has the authority to decide disputes
including the question of jurisdiction. It was further stated that
jurisdictional issues concerning whether certain parties are
bound by a particular arbitration under the group-company
doctrine etc. in a multi-party arbitration raise complicated
questions of fact which are best left to the tribunal to decide.
• In In Re: Interplay (supra) the position taken in Vidya Drolia
(supra) was clarified to state that the scope of examination
under Section 11(6) should be confined to the “existence of the
arbitration agreement” under Section 7 of the Act, 1996 and
the “validity of an arbitration agreement” must be restricted to
the requirement of formal validity such as the requirement that
the agreement be in writing. Therefore, substantive objections
pertaining to existence and validity on the basis of evidence
must be left to the arbitral tribunal since it can “rule” on its own
jurisdiction.
• Krish Spinning (supra) cautioned that the Courts delving into
the domain of the arbitral tribunal at the Section 11 stage run
the risk of leaving the claimant remediless if the Section 11
application is rejected. Further, it was stated that a detailed
examination by the courts at the Section 11 stage would be
counterproductive to the objective of expeditious disposal of
Section 11 application and simplification of pleadings at that
stage.
• Cox and Kings (supra) specifically dealt with the scope of
inquiry under Section 11 when it comes to impleading the
non-signatories in the arbitration proceedings. While saying
that the referral court would be required to prima facie rule
on the existence of the arbitration agreement and whether
the non-signatory party is a veritable party to the arbitration
agreement, it also said that in view of the complexity in such a
determination, the arbitral tribunal would be the proper forum.
It was further stated that the issue of determining parties to an
938 [2024] 9 S.C.R.
Digital Supreme Court Reports
arbitration agreement goes to the very root of the jurisdictional
competence of the arbitral tribunal and can be decided under
its jurisdiction under Section 16.
ii. Whether on a prima facie view, the SRG Group being a
non-signatory to the FAA, can be referred to arbitration?
66. It is well settled that an arbitration agreement, in order to qualify as
a valid agreement, has to satisfy the requirements stipulated under
Section 7 of the Act, 1996 along with the principles of law under
the Indian Contract Act, 1872. Having regard to the submissions
of both the Respondent Groups i.e., JRS and SRG, it can be said
that they have raised manifold objections to the present petition,
however, none of those objections question or deny the existence
of the arbitration agreement under which the arbitration has been
invoked by the Petitioner AMP Group. In fact, the JRS Group has
no objection to resolve the disputes with the AMP Group by way of
arbitration. Their primary objection is only that the SRG Group cannot
be a part of the arbitration proceedings. Therefore, the requirement
of prima facie existence of an arbitration agreement, as stated under
Section 11 of the Act, 1996 is satisfied.
67. However, the core issue that falls for our consideration is whether
the SRG Group, being a non-signatory to the FAA can also be
referred to arbitration and whether they are “veritable” parties to the
arbitration agreement.
68. This Court in Cox and Kings (supra) held that the definition of
“parties” under Section 2(1)(h) read with Section 7 of the Act, 1996
includes both the signatory as well as non-signatory parties. Persons
or entities who have not formally signed the arbitration agreement
or the underlying contract containing the arbitration agreement may
also intend to be bound by the terms of the agreement. Further, the
requirement of a written agreement under Section 7 of the Act, 1996
does not exclude the possibility of binding non-signatory parties if
there is a defined legal relationship between the signatory and non-
signatory parties. Therefore, the issue as to who is a “party” to an
arbitration agreement is primarily an issue of consent. Actions or
conduct could be an indicator of the consent of a party to be bound
by the arbitration agreement. This aspect is also evident from a
reading of Section 7(4)(b) which emphasises on the manifestation
of the consent of persons or entities through actions of exchanging
[2024] 9 S.C.R. 939
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
documents. The relevant observations made in Cox and Kings
(supra) are extracted hereinbelow:
“83. Reading Section 7 of the Arbitration Act in view of the
above discussion gives rise to the following conclusions :
first, arbitration agreements arise out of a legal relationship
between or among persons or entities which may be
contractual or otherwise; second, in situations where the
legal relationship is contractual in nature, the nature of
relationship can be determined on the basis of general
contract law principles; third, it is not necessary for the
persons or entities to be signatories to the arbitration
agreement to be bound by it; fourth, in case of non-signatory
parties, the important determination for the Courts is
whether the persons or entities intended or consented to
be bound by the arbitration agreement or the underlying
contract containing the arbitration agreement through
their acts or conduct; fifth, the requirement of a written
arbitration agreement has to be adhered to strictly, but the
form in which such agreement is recorded is irrelevant;
sixth, the requirement of a written arbitration agreement
does not exclude the possibility of binding non-signatory
parties if there is a defined legal relationship between the
signatory and non-signatory parties; and seventh, once
the validity of an arbitration agreement is established, the
Court or tribunal can determine the issue of which parties
are bound by such agreement.”
84. It is presumed that the formal signatories to an
arbitration agreement are parties who will be bound by
it. However, in exceptional cases persons or entities who
have not signed or formally assented to a written arbitration
agreement or the underlying contract containing the
arbitration agreement may be held to be bound by such
agreement. As mentioned in the preceding paragraphs,
the doctrine of privity limits the imposition of rights and
liabilities on third parties to a contract. Generally, only the
parties to an arbitration agreement can be subject to the
full effects of the agreement in terms of the reliefs and
remedies because they consented to be bound by the
arbitration agreement. Therefore, the decisive question
940 [2024] 9 S.C.R.
Digital Supreme Court Reports
before the Courts or tribunals is whether a non-signatory
consented to be bound by the arbitration agreement.
To determine whether a non-signatory is bound by an
arbitration agreement, the Courts and tribunals apply typical
principles of contract law and corporate law. The legal
doctrines provide a framework for evaluating the specific
contractual language and the factual settings to determine
the intentions of the parties to be bound by the arbitration
agreement. [ Gary Born, International Arbitration Law and
Practice, (3rd Edn., 2021) at p. 1531.]
xxx xxx xxx
170. In view of the discussion above, we arrive at the
following conclusions:
170.1. The definition of “parties” under Section 2(1)(h)
read with Section 7 of the Arbitration Act includes both
the signatory as well as non-signatory parties;
170.2. Conduct of the non-signatory parties could be an
indicator of their consent to be bound by the arbitration
agreement;
170.3. The requirement of a written arbitration agreement
under Section 7 does not exclude the possibility of binding
non-signatory parties;[…]”
(Emphasis supplied)
69. The fact that a non-signatory did not put pen to paper may be an
indicator of its intention to not assume any rights, responsibilities
or obligations under the arbitration agreement. However, the
courts and tribunals should not adopt a conservative approach to
exclude all persons or entities who intended to be bound by the
underlying contract containing the arbitration agreement through
their conduct and their relationship with the signatory parties. The
mutual intent of the parties, relationship of a non-signatory with a
signatory, commonality of the subject matter, composite nature of
the transactions and performance of the contract are all factors
that signify the intention of the non-signatory to be bound by the
arbitration agreement.
[2024] 9 S.C.R. 941
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
70. An important factor to be considered by the Courts and Tribunals
is the participation of the non-signatory in the performance of the
underlying contract. In this regard, it was observed in Cox and
Kings (supra) as follows:
“123. […] The intention of the parties to be bound
by an arbitration agreement can be gauged from the
circumstances that surround the participation of the
non-signatory party in the negotiation, performance, and
termination of the underlying contract containing such
agreement. The UNIDROIT Principle of International
Commercial Contract, 2016 [UNIDROIT Principles of
International Commercial Contracts, 2016, Article 4.3.]
provides that the subjective intention of the parties
could be ascertained by having regard to the following
circumstances:
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between
themselves;
(c) the conduct of the parties subsequent to the conclusion
of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions
in the trade concerned; and
(f) usages.
xxx xxx xxx
126. Evaluating the involvement of the non-signatory party
in the negotiation, performance, or termination of a contract
is an important factor for a number of reasons. First, by
being actively involved in the performance of a contract,
a non-signatory may create an appearance that it is a
veritable party to the contract containing the arbitration
agreement; second, the conduct of the non-signatory may
be in harmony with the conduct of the other members of
the group, leading the other party to legitimately believe
that the non-signatory was a veritable party to the contract;
942 [2024] 9 S.C.R.
Digital Supreme Court Reports
and third, the other party has legitimate reasons to rely
on the appearance created by the non-signatory party so
as to bind it to the arbitration agreement.
xxx xxx xxx
127. […] The nature or standard of involvement of the
non-signatory in the performance of the contract should
be such that the non-signatory has actively assumed
obligations or performance upon itself under the contract.
In other words, the test is to determine whether the non-
signatory has a positive, direct, and substantial involvement
in the negotiation, performance, or termination of the
contract. Mere incidental involvement in the negotiation
or performance of the contract is not sufficient to infer the
consent of the non-signatory to be bound by the underlying
contract or its arbitration agreement. The burden is on the
party seeking joinder of the non-signatory to the arbitration
agreement to prove a conscious and deliberate conduct
of involvement of the non-signatory based on objective
evidence.”
(Emphasis supplied)
71. It is evident that the intention of the parties to be bound by an
arbitration agreement can be gauged from the circumstances
that surround the participation of the non-signatory party in the
negotiation, performance, and termination of the underlying contract
containing such an agreement. Further, when the conduct of the
non-signatory is in harmony with the conduct of the others, it
might lead the other party or parties to legitimately believe that the
non-signatory was a veritable party to the contract containing the
arbitration agreement. However, in order to infer consent of the non-
signatory party, their involvement in the negotiation or performance
of the contract must be positive, direct and substantial and not be
merely incidental. Thus, the conduct of the non-signatory party
along with the other attending circumstances may lead the referral
court to draw a legitimate inference that it is a veritable party to the
arbitration agreement.
72. Of the several entities pertaining to which settlement is contemplated
under the FAA dated 28.02.2020 executed between the AMP Group
[2024] 9 S.C.R. 943
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
and JRS Group, clauses 2.1.4 and 2.1.6 relate to Millenium and
Deegee which are Respondent Nos. 7 and 8 companies respectively.
It is an undisputed fact that Respondent Nos. 7 and 8 companies
are themselves a part of the SRG Group. Therefore, prima facie
without the joinder of the SRG Group, which includes Millenium
and Deegee, there may not be a complete and effective resolution
of the disputes arising out of the FAA between the AMP and JRS
Groups.
73. Clause 2.1.4 read with Schedule 7 of the FAA prima facie indicates that
the petitioners i.e., the AMP Group has to exit from the Respondent
No.7 company i.e. Millenium where they hold Class A equity shares
amounting to 36%. According to the procedure contemplated therein,
during Phase 1 of the Millenium exit, the SRG Group (which already
holds 40% shares in Millenium) is supposed to additionally purchase
approx. 11% of the shares in Millenium held by the AMP Group. It
is stated therein that the JRS Group would provide the necessary
funding to SRG Group to purchase the aforementioned shares.
In Phase 2, Millenium would buy back the balance shares of the
AMP Group i.e., approx. 25% from the funds to be received from
Respondent No. 8 company i.e. Deegee.
74. Clause 2.1.6 read with Schedule 8 prima facie indicates that the JRS
Group and SRG Group would completely exit from the Respondent
No. 8 Company i.e., Deegee. The proceeds received by the AMP
Group from the sale of its shares in Millenium as per Phase 1 of
the Millenium exit would be brought into Deegee by the AMP Group.
AMP Group is also required to bring further funds into Deegee to
pay off the entire loan provided by Millenium to Deegee along with
interest at the rate of 14.5% compounded annually. Simultaneously
with the repayment of loans to Millenium as aforesaid, Deegee is also
required to pay off the entire loan provided by the JRS Group and
SRG Group with interest at the rate of 14.5% compounded annually.
Subsequently, the shares of Deegee held by the JRS Group and
SRG Group would be transferred completely to the AMP Group.
75. In short, while the AMP Group is supposed to exit from Millenium and
acquire shares in Deegee, the JRS and SRG Groups are supposed
to exit from Deegee and, the SRG Group would acquire shares in
Millenium. It is also provided that agreements are to be executed
with or by the SRG Group to record and finalize the understanding
944 [2024] 9 S.C.R.
Digital Supreme Court Reports
with respect to the exit of AMP Group from Millenium and the exit of
JRS and SRG Groups from Deegee. Recognising the interdependent
nature of the transactions contemplated with respect to Millenium and
Deegee, clause 2.1.4(a) also states that the exit of Millenium and
Deegee should be endeavoured to be undertaken simultaneously
on the same day.
76. Further Clause 2.1.7 requires the AMP Group to irrevocably and
unconditionally withdraw all litigations including CP/383/2017 filed
in connection with Deegee by the AMP Group before the NCLT at
Mumbai wherein Respondent No.9 of the SRG Group is one of the
respondents.
77. All that has been stated aforesaid gives an impression, though prima
facie, that the SRG Group may be connected to the FAA and forms
part of the settlement contemplated therein. However, this aspect
should be looked into more closely by the Arbitral Tribunal.
78. Moreover, on the question whether the non-signatory party i.e., the
SRG Group intended or consented to be bound by the arbitration
agreement or the underlying contract containing the arbitration
agreement through their acts or conduct, elaborate submissions
have been made on behalf of all three groups, by placing reliance
on the terms of the agreement, several email exchanges etc. On
bare perusal of the email exchanges produced by the petitioner, it
appears prima facie that several contested questions of fact, including
but not limited to those hereinbelow, need to be first resolved:
• Whether Mr. Kalpesh Parmar or the JRS Group can be said
to have represented the interests of the SRG Group during
the negotiations leading up to the FAA, its implementation and
during the mediation process;
• Whether the marking of several emails to the Respondent
No.9 of the SRG Group and the absence of any protest on his
part can imply consent of the SRG Group to be bound by the
underlying contract and/or the arbitration agreement;
• Whether the documents required for the valuation and due
diligence of Millenium and Deegee could have been shared
by an employee of Deegee without the knowledge or consent
of the SRG Group; and
[2024] 9 S.C.R. 945
Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors.
• Whether the demand of an additional Rs. 25 crore made by the
SRG Group through the JRS Group as a condition for exit from
Deegee indicates their intention to be bound by the underlying
contract and/or the arbitration agreement?
79. A detailed examination of numerous disputed questions of fact are
imperative in deciding whether the SRG Group participated in the
negotiation and performance of the underlying contract and can be
bound by the arbitration agreement. At the cost of repetition, we may
state that under our limited jurisdiction afforded under Section 11(6)
of the Act, 1996 we should not conduct a mini trial and delve into
contested or disputed questions of fact. This has been categorically
laid down in several decisions of this Court including Vidya Drolia
(supra) and Krish Spinning (supra). Further, it is also the case of
the SRG Group that a dual test needs to be satisfied before it is
compelled to be a party to the present arbitration proceedings i.e.,
(a) SRG Group should be shown to have agreed to the underlying
contract and (b) SRG Group should also be shown to have agreed
to be bound by the arbitration agreement. We are of the considered
view that the same requires a much more detailed examination of
the evidence that may be adduced by the parties which can only be
gone into by the Arbitral Tribunal.
80. Therefore, considering the complexity involved in the determination
of the question whether the SRG Group is a veritable party to the
arbitration agreement or not, we are of the view that it would be
appropriate for the arbitral tribunal to take a call on the question
after taking into consideration the evidence that may be adduced
by the parties before it and the application of the legal doctrine as
elaborated in the decision in Cox and Kings (supra).
81. We also prima facie find force in the contention of the petitioner AMP
Group that the nomenclature of the agreement is not determinative
of its character as held by this Court in Sasan Power Ltd. (supra).
Therefore, the fact that the underlying contract is called the “Family
Arrangement Agreement” by itself may not preclude the impleadment
of the SRG Group in arbitration.
82. Once the arbitral tribunal is constituted, it shall be open for the
respondents to raise all the available objections in law, and it is only
after (and if) the preliminary objections are rejected that the tribunal
shall proceed to adjudicate the claims of the Petitioners.
946 [2024] 9 S.C.R.
Digital Supreme Court Reports
F. CONCLUSION
83. In view of the aforesaid, the present petition is allowed. We appoint
Mr. Akil Kureshi (Former Chief Justice, High Court of Rajasthan) to
act as the sole arbitrator. The fees of the arbitrator including other
modalities shall be fixed in consultation with the parties.
84. It is made clear that all the rights and contentions of the parties are
left open for adjudication by the learned arbitrator.
85. Pending application(s), if any, shall stand disposed of.
Result of the Case: Petition allowed.
†
Headnotes prepared by: Ankit Gyan
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Section 11(6) of Arbitration and Conciliation Act, 1996"Sign in to search