Supreme Court of India
HINDUSTAN PETROLEUM CORPORATION LTD.versusBCL SECURE PREMISES PVT. LTD.
- Citation
- 2025 INSC 1401
- Decided
- 9 December 2025
- Disposal
- Appeal(s) allowed
- Bench
- B PARDIWALA
Holding
A non‑signatory who is not a veritable party to the underlying contract cannot be referred to arbitration; the referral court must only conduct a prima‑facie test and, in this case, BCL failed that test.
Summary
Hindustan Petroleum Corporation Ltd. (HPCL) floated a tender for a tank‑truck locking system and awarded a purchase order to AGC Networks Ltd., which later engaged BCL Secure Premises Pvt. Ltd. (BCL) as a sub‑vendor. HPCL alleged non‑performance by AGC and denied any contractual relationship or payment liability to BCL. BCL invoked the arbitration clause in HPCL's tender and filed a Section 11(4) application seeking referral to arbitration, claiming it was a veritable party to the underlying contract. The High Court allowed the application, but the Supreme Court held that BCL was not a party to the arbitration agreement because there was no privity, no consent to assignment, and no intention to bind HPCL to BCL, failing the prima‑facie test for a non‑signatory. The Court reiterated that the referral court must only conduct a prima‑facie examination of the existence of an arbitration agreement and leave the determination of a non‑signatory's status to the arbitral tribunal. Consequently, the Supreme Court set aside the High Court order and dismissed the arbitration application. The appeal was allowed.
Issues considered
- Whether the High Court was justified in referring the dispute to arbitration under Section 11(4) of the Arbitration and Conciliation Act, 1996 despite BCL being a non‑signatory.
- Whether BCL can be deemed a veritable party to the arbitration agreement between HPCL and AGC.
- Whether the existence of an arbitration agreement can be established prima facie in the absence of privity and consent.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11(4), s. 11(6-A), s. 16, s. 37
- Insolvency and Bankruptcy Code, 2016s. 9
Headnote
Issue for Consideration Issue arose whether the High Court, was justified in referring the parties to arbitration by allowing the petition u/s.11(4) of the Arbitration and Conciliation Act, 1996. Headnotes† Arbitration and Conciliation Act, 1996 – Appointment of arbitrators a tender and issued a purchase order in favour of the contractor-successful tenderer – Tender prohibited sub-letting, sub-contracting without the prior consent of the owner obtained in writing – Appellant issued notice to the contractor with regard to non-functioning and
Subjects
Referring the parties to arbitrationAppointment of arbitratorPurchase orderTenderProhibited sub-letting, sub-contracting without prior consent of ownerResolution of disputesSettlement-cum-Assignment AgreementAssign receivables of contractorReferral courtArbitration agreementNon-signatoryVeritable partyConsensual theoryNon-consensual theory
Judgment
[2025] 12 S.C.R. 455 : 2025 INSC 1401
Hindustan Petroleum Corporation Ltd.
v.
BCL Secure Premises Pvt. Ltd.
(Civil Appeal No. 14647 of 2025)
09 December 2025
[J.B. Pardiwala and K.V. Viswanathan,* JJ.]
Issue for Consideration
Issue arose whether the High Court, was justified in referring
the parties to arbitration by allowing the petition u/s.11(4) of the
Arbitration and Conciliation Act, 1996.
Headnotes†
Arbitration and Conciliation Act, 1996 – Appointment of
arbitrators – Appellant-Corporation floated a tender and
issued a purchase order in favour of the contractor-successful
tenderer – Tender prohibited sub-letting, sub-contracting
without the prior consent of the owner obtained in writing –
Appellant issued notice to the contractor with regard to
non-functioning and unsatisfactory performance – Later, the
respondent informed the appellant that they were working
as sub-vendor of the contractor and were entitled to receive
94% of the payment due – Appellant informed respondent
that the appellant had not entered into any contract with the
respondent and as such no payments due to the respondent
from the appellant – Thereafter, series of proceedings between
them – Respondent issued notice to the appellant invoking
arbitration – Resolution of disputes between the respondent
and the contractor, Settlement-cum-Assignment Agreement
signed, to assign the receivables of contractor against the
appellant to the respondent – Respondent then raised claim
which was denied by the appellant – Respondent filed petition
u/s.11(4) – High Court allowed application and appointed an
arbitrator to adjudicate upon the disputes and differences
between the parties – Justification:
Held: Referral court should be prima facie satisfied that there exists
an arbitration agreement and as to whether the non-signatory is a
veritable party – Even if the referral court prima facie arrives at the
* Author
456 [2025] 12 S.C.R.
Supreme Court Reports
satisfaction that the non- signatory is a veritable party, the arbitral
tribunal is not denuded of its jurisdiction to decide whether the non-
signatory is indeed a party to the arbitration agreement on the basis
of factual evidence and application of legal doctrine – Appellant
has no privity at all with the respondent – To the documentation
between the contractor and the respondent, the appellant was
not a party – Appellant and the respondent have been operating
on separate orbits – Not been established even prima facie that
there was any intention to bind respondent to the contract between
appellant and contractor – Respondent not shown any consent for
assignment as required under the clause of the tender document –
Nothing even prima facie shown to establish that there was any
semblance of an intent to effect legal relationship between the
respondent and the party originally granting the contract and/or to
indicate that the respondent was a veritable party – Applying the
consensual theory or the non-consensual theory, the respondent
not established its case to show even prima facie the existence of
an arbitration agreement between appellant and the respondent –
Settlement-cum-Assignment Agreement between contractor and
respondent have been perused and under the clause, the contractor
has represented and warranted that any amount/receivables
accruing to the contractor as a result of litigation/proceeding
initiated by respondent against the appellant was to be transferred
to respondent – This does not mean that there is an arbitration
agreement existing between the appellant and respondent or
that respondent was a veritable party to the agreement between
appellant and contractor – Respondent fails the prima facie test
of being a veritable party to the arbitration agreement between
the appellant and the contractor – Non-existence of an arbitration
agreement between the parties – Thus, the judgment and order
passed by the High Court set aside. [Paras 24, 30-32, 36, 38,
40, 42, 43]
Case Law Cited
Cox and Kings Limited v. Sap India Private Limited and Another
[2023] 15 SCR 621 : (2024) 4 SCC 1; In Re: Interplay Between
Arbitration Agreements under Arbitration and Conciliation Act,
1996 & Stamp Act, 1899 [2023] 15 SCR 1081 : (2024) 6 SCC
1; SBI General Insurance Company Limited v. Krish Spinning
[2024] 7 SCR 840 : (2024) 12 SCC 1; Ajay Madhusudan Patel
and Others v. Jyotrindra S. Patel and Others [2024] 9 SCR 894 :
[2025] 12 S.C.R. 457
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
(2025) 2 SCC 147; ASF Buildtech Private Limited v. Shapoorji
Pallonji and Company Private Limited (2025) 9 SCC 76; Khardah
Company Limited v. Raymon & Co., 1962 INSC 202 : [1963] 3
SCR 183 – referred to.
Pravin Electricals Private Limited v. Galaxy Infra & Engineering
Private Limited [2021] 1 SCR 1162 : (2021) 5 SCC 671; Cox &
Kings Ltd. (2) v. SAP (India) Pvt. Ltd. [2024] 9 SCR 199 : (2025)
1 SCC 611 – held inapplicable.
Books and Periodicals Cited
Illustrated Oxford Dictionary (Revised Edition 2003) – referred to.
List of Acts
Arbitration and Conciliation Act, 1996; Insolvency and Bankruptcy
Code, 2016.
List of Keywords
Referring the parties to arbitration; Appointment of arbitrator;
Purchase order; Tender; Prohibited sub-letting, sub-contracting
without prior consent of owner; Resolution of disputes; Settlement-
cum-Assignment Agreement; Assign receivables of contractor;
Referral court; Arbitration agreement; Non-signatory; Veritable
party; Consensual theory; Non-consensual theory.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14647 of 2025
From the Judgment and Order dated 07.04.2025 of the High Court
of Judicature at Bombay in CAA No. 125 of 2025
Appearances for Parties
Advs. for the Appellant(s):
Tushar Mehta, Solicitor General, Sanjay Kapur, Surya Prakash,
Ms. Shubhra Kapur, Ms. Mansi Kapur, Abhishek Tiwari.
Advs. for the Respondent(s):
Nalin Kohli, Ms. Aarushi Yadav, Sr. Advs., Chirag Madan, Ravleen
Sabharwal, G. Sai Krishna Kumar, Rahul Agarwal, Ronit Bose,
Ms. Nimisha Menon, Ayuushman Arora, Randeep Sabharwal, Vijay
Pal, Deepankar, Anubhav.
458 [2025] 12 S.C.R.
Supreme Court Reports
Judgment / Order of the Supreme Court
Judgment
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of the judgment
and order dated 07.04.2025 passed by the learned Single Judge of the
High Court of Judicature at Bombay in Comm. Arbitration Application
No.125/2025. By the said order, the learned Single Judge allowed the
Section 11(4)-Application filed under the Arbitration and Conciliation
Act, 1996 (for short the “A&C Act) of the respondent-BCL Secure
Premises Pvt. Ltd. (hereinafter referred to as the “BCL”) and appointed
an arbitrator to adjudicate upon the disputes and differences between
the parties herein. Aggrieved, the appellant-Hindustan Petroleum
Corporation Ltd. (for short ‘Corporation’) is in appeal.
3. The facts giving rise to the appeal are as follows:
4. The appellant-Corporation floated a tender for design, supply,
installation, integration, testing, commissioning and post-commissioning
warranty support services of Tank Truck Locking System (for short
the “TTLS”).
5. The tender conditions had a specific clause stating that the contractor
shall not be entitled to sublet, transfer or assign, the work under the
contract without the prior consent of the owner obtained in writing. The
relevant clauses of the tender conditions are set out hereinbelow:-
“2.6 The “Contract” between the Owner and the Contractor
shall mean and include all documents like enquiry, tender
submitted by the contractor and the purchase order issued
by the owner and other documents connected with the issue
of the purchase order and orders, instruction, drawings,
change orders, directions issued by the Owner/Engineer-
in-Charge/Site-in-Charge for the execution, completion and
commissioning of the works and the period of contract
mentioned in the Contract including such periods of time
extensions as may be granted by the owner at the request
of the contractor and such period of time for which the work
is continued by the contractor for purposes of completion
of the work.
[2025] 12 S.C.R. 459
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
3.17 Contractor shall not be entitled to sublet, subcontract
or assign; the work under this Contract without the prior
consent of the Owner obtained in writing.
5.c SUBLETTING OF WORK
5.c.1 No part of the contract nor any share or interest
thereof shall in any manner or degree be transferred,
assigned or sublet, by the Contractor, directly or indirectly
to any firm or corporation whatsoever without the prior
consent in writing of the Owner.
14. ARBITRATION
14.1 All disputes and differences of whatsoever nature,
whether existing or which shall at any time arise between
the parties hereto touching or concerning the agreement,
meaning, operation or effect thereof or to the rights and
liabilities of the parties or arising out of or in relation thereto
whether during or after completion of the contract or
whether before after determination, foreclosure, termination
or breach of the agreement (other than those in respect
of which the decision of any person is, by the contract,
expressed to be final and binding) shall, after written notice
by either party to the agreement to the other of them and to
the Appointing Authority hereinafter mentioned, be referred
for adjudication to the Sole Arbitrator to be appointed as
hereinafter provided.
14.9 Subject to the aforesaid, the provisions of the
Arbitration and Conciliation Act, 1996 or any statutory
modification or re-enactment thereof and the rules made
thereunder, shall apply to the Arbitration proceedings
under this Clause.
14.10 The Contract shall be governed by and constructed
according to the laws in force in India. The parties hereby
submit to the exclusive jurisdiction of the Courts situated
at Mumbai for all purposes. The Arbitration shall be held
at Mumbai and conducted in English language.”
6. On 20.08.2013, the appellant issued a purchase order in favour of
the successful tenderer-M/s AGC Networks Ltd (for short “AGC”)
460 [2025] 12 S.C.R.
Supreme Court Reports
(presently known as Black Box Limited) and AGC duly accepted
the purchase order by a letter of acceptance on 21/22.08.2013. On
08.09.2016, the appellant issued a notice to AGC with regard to non-
functioning of Electro Magnetic Locking System [for short ‘EMLS’]
at Pilot locations of Vashi and Manmad. Further, on 02.02.2017,
the appellant issued a show cause notice to AGC for unsatisfactory
performance of EMLS at the said two locations.
7. On 14.06.2018, the respondent-BCL informed the appellant that they
were working as sub-vendor of AGC and were entitled to receive 94%
of the payment due. On 25.06.2018, appellant informed AGC that
since it could not complete the project successfully, no payment was
due to them. On 26.06.2018, appellant informed respondent-BCL in
reply to BCL’s letter dated 14.06.2018 stating that the appellant had
not entered into any contract with BCL and as such no payments are
due to BCL from the appellant. Thereafter, a series of proceedings
ensued between the respondent-BCL and the AGC.
8. On 27.07.2018, a civil suit came to be filed by BCL against AGC before
Patiala House Court at New Delhi seeking injunction against AGC
from invoking the bank guarantee submitted by BCL. The appellant
was not a party to this suit. Thereafter, a Section 9-Petition under
the Insolvency and Bankruptcy Code, 2016 was filed by BCL against
AGC. The Section 9-Petition came to be rejected on 17.07.2019.
9. In 2020, BCL filed its first claim (No. 1446/2020) with the Micro,
Small and Medium Enterprises (MSME) Facilitation Council, Haryana
against AGC for the payment of outstanding dues. The matter was
referred to arbitration and here again the appellant was not a party.
On 20.06.2020, the respondent BCL withdrew the claim from the
Arbitral Tribunal in view of the amicable settlement with AGC. On
17.07.2020, respondent-BCL withdrew the civil suit filed against AGC.
10. In 2021, respondent-BCL filed its second claim (No. 2411/2021)
against AGC with the MSME Facilitation Council. The matter was
referred to arbitration and here again the appellant was not a party.
11. On 25.11.2022, the second claim was rejected by the arbitrator as
not maintainable due to relinquishment of rights by BCL under the
20.06.2020 settlement.
12. On 25.03.2023, third claim was filed against AGC by BCL in
MSME Facilitation Council, Haryana and this was rejected as not
maintainable.
[2025] 12 S.C.R. 461
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
13. On 28.08.2024, respondent-BCL issued a notice to the appellant
invoking arbitration under Section 21 of the A&C Act, setting out
the following:-
A. After AGC was awarded a purchase order, AGC entered into an
agreement dated 15.01.2014 on back-to-back basis with BCL
wherein entire performance concerning the supply of TTLS was
to be undertaken by BCL.
B. That as per the said contractual arrangement of 15.01.2014,
BCL was obligated to perform the services and AGC was
merely an intermediary since 96% of the total amount payable
by HPCL was accruing in favour of BCL. The relevant clauses
of the contractual arrangement between BCL and AGC are set
out hereinbelow:-
“And whereas “AGC” wishes to engage “BCL”
and “BCL” has agreed to supply install integrate
test commission and warranty and post-warranty
support services of HPCL TTLS (Tank Truck Locking
System) to “AGC” on a back-to-back basis and more
specifically described in the referred Tender as per
Annexure - I forming an integral part of this Agreement
BCL has reviewed all the annexures, fully understood
HPCL’s requirement and has agreed to bear all costs
take full responsibility and to Indemnify AGC in case
of this Pilot Project not being successful and resultant
cancellation of contract by HPCL.
4. OBLIGATIONS OF “BCL”
4.1 “BCL” shall provide a Project Manager
at its own cost and towards the successful
completion of the entire HPCL TTLS project
The Project Manager shall be responsible for
the communication and co-ordination between
BCL/AGC/HPCL. However, the Project Manager
mentioned herein above shall not make any such
communication/co-ordination with HPCL without
obtaining the prior written approval from AGC.”
462 [2025] 12 S.C.R.
Supreme Court Reports
11. ARBITRATION
Any and all dispute(s) or difference(s) between
the parties hereto arising out of or relating to this
agreement and which is not amicably settled between
the parties within 60 (Sixty) days from the date of such
dispute or difference, the same shall be referred for
arbitration to such person as may be appointed by
the parties hereto and the same shall be adjudicated
in accordance with the Arbitration and Re-Conciliation
Act 1996 and its latest amendments.
The cost of any such Arbitration shall be solely borne
by the defending party. The place of arbitration shall
be jurisdiction of New Delhi/Mumbai Court. The
language of the arbitration shall be English. Award
of Arbitration shall be final and binding on both the
parties.”
(Emphasis supplied)
C. That after the resolution of disputes between BCL and AGC, a
Settlement-cum-Assignment Agreement was signed by AGC and
BCL on 31.10.2023, to assign the receivables of AGC against
HPCL to BCL. Relevant clauses read as under: -
“2. ASSIGNMENT OF RECEIVABLES
2.1 The present Agreement further records the
existing position that all claims and counter-claims
of Parties against each other have been settled,
relinquished, closed and Parties are discharged
against each other for all future claims and liabilities.
However, it is understood that BCL may be desirous
of proceeding against HPCL. by filing the necessary
application/petition before the competent authority or
court for recovery of purported dues arising out of the
HPCL PO. It is however agreed by BCL that, Black
Box shall not be impleaded or joined as a party to
any such legal action or litigation/proceedings that
may be initiated by BCL and such actions of BCL
shall not result in any adverse action or cause any
prejudice to Black Box.
[2025] 12 S.C.R. 463
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
2.2 Subject to compliance of the reciprocal obligations
under this Agreement by the BCL Black Box hereby
represents and warrants that any amount/receivables
accruing to Black Box as a result of the litigation/
proceedings initiated by BCL against HPCL shall
stand transferred/assigned to, BCL in entirety. Black
Box shall not retain any amount/receivable that may
accrue to it in terms of the order/direction of the
competent authority or court in any such litigation/
proceedings initiated against HPCL.
3.20 GOVERNING LAW, DISPUTE RESOLUTION
AND JURISDICTION:
This Agreement shall be governed by and construed
in accordance with the laws of India and shall be
subject to the exclusive jurisdiction of the competent
courts in New Delhi only.
Both Parties agree that all disputes and/or differences
arising out of or relating to or under this Agreement
between the Parties shall, unless amicably resolved
within 30 days of mutual discussions, be finally
settled by reference to arbitration in accordance with
the Arbitration and Conciliation Act, 1996 read with
its subsequent amendments and the Rules framed
thereunder. The Arbitration shall be conducted at
New Delhi. The Arbitration proceedings shall be
conducted in English language. The decision of the
arbitral tribunal shall be binding on the Parties.”
D. That BCL has entered into the position of AGC and can agitate
all pending claims with the appellant and a claim was raised to
the tune of Rs. 3,00,01,810/- along with 18% interest.
14. The Arbitration Clause for Indian Bidders issued in the tender of the
appellant was invoked vide legal notice dated 28.08.2024.
15. On 26.09.2024, appellant sent a reply denying the contentions made
by BCL setting out the following grounds:-
A. There was no privity of contract between the appellant and BCL.
464 [2025] 12 S.C.R.
Supreme Court Reports
B. The claim amount and assignment agreement were unfounded,
false and denied.
C. That the purported assignment agreement was not valid in law
as no prior written consent was obtained from HPCL by AGC.
D. There was no valid purchase order between HPCL and BCL.
16. BCL issued another notice dated 12.11.2024 and followed it up with a
petition under Section 11(4) of the A&C Act before the High Court of
Judicature at Bombay dated 28.02.2025. The appellant-Corporation
objected by raising all the contentions set out in their reply along
with the additional contention that the application was time-barred.
17. By the judgment dated 07.04.2025, the High Court allowed the
Section 11-Application with the following reasoning:-
“3. This to my mind raises a clear capacity for the
Respondent to file an application under Section 16 of
the Act, whereby the arbitral tribunal should decide
the arbitrability of the disputes. In the peculiar facts of
this case, while allowing this Section 11 Application by
making a reference to the arbitral tribunal, it is directed
that the arbitrability of the disputes should be decided as
preliminary issue upfront by the arbitral tribunal, so that
the interests of the parties are well balanced and protected
and unnecessary time is not wasted, should the arbitral
tribunal reach a conclusion that the arbitration agreement
would not bind the Respondent with the assignee of AGC
Networks Limited.
4. Being satisfied that an arbitration agreement is in
existence but taking into account the objection raised by
the Respondent that the Respondent had a right to approve
the counter-party prior to the assignment of rights of the
Applicant, this aforesaid request to the Arbitral Tribunal,
asking for the Section 16 Application to be decided first
as a preliminary issue is being made.”
18. Aggrieved, the appellant-Corporation is before us.
19. We have heard Mr. Tushar Mehta, learned Solicitor General and
Mr. Sanjay Kapur, learned counsel for the appellant. We have also
heard Mr. Nalin Kohli, learned senior counsel for the respondent.
We have perused the records.
[2025] 12 S.C.R. 465
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
CONTENTIONS OF THE APPELLANT:-
20. Mr. Tushar Mehta, the learned Solicitor General, appearing for the
appellant contends that there is no legal relationship between the
appellant and the respondent inasmuch as there was no privity of
contract between them. Learned Solicitor General contends that, at
no stage, BCL was ever involved either in the preliminary negotiation
or at the execution stage. It is further contended that there is no
material/document which discloses that the appellant had the
knowledge of BCL participating in the performance of the underlying
contract. Learned Solicitor General contended that the respondent
had entered into series of litigation with AGC, and the court below
had not made any reference to it in the impugned order. Learned
Solicitor General contends that the claim was also ex facie time-
barred and it is manifest from the record. Learned Solicitor General
contends that at the Section 11 stage that the court has an obligation
to prima facie examine whether the dispute is arbitrable and even
applying that limited test, the records reveal that the dispute was not
arbitrable. Learned Solicitor General extensively relied on Clauses
3.17 and 5 of the General Terms and Conditions of Works Contract
to contend that there was express prohibition to sub-let, sub-contract
or assign the work or any share of interest thereof without the prior
consent of the owner obtained in writing.
21. Refuting the submissions, Mr. Nalin Kohli, learned Senior Advocate,
appearing for the respondent contended that the test whether a
non-signatory would be bound by an arbitration agreement entails a
fact-intensive inquiry involving a mixed question of fact and law and,
therefore, the arbitral tribunal would be the more appropriate forum
to carry out the said inquiry. Mr. Kohli, learned Senior Advocate,
further contends that the appellant had knowledge of the sub-letting
agreement between the respondent and AGC, presently known as
Black Box Limited. Mr. Kohli, learned Senior Advocate, referred to
the agreement signed between the respondent and the AGC dated
15.01.2014; the purchase orders issued to the respondent by AGC,
the escrow account opened by AGC; the monies transferred to the
escrow account by the appellant. Mr. Kohli also referred to certain
email communications, copies of which are marked to the appellant.
Mr. Kohli further referred to the Settlement-cum-Assignment
Agreement dated 31.10.2023 assigning the right to receivables and
466 [2025] 12 S.C.R.
Supreme Court Reports
AGC giving up its rights and invoked the veritable party doctrine to
sustain the impugned order. Mr. Kohli, learned Senior Advocate,
prayed for the dismissal of the appeal.
22. We have considered the rival submissions and perused the records
of the case.
QUESTION FOR CONSIDERATION: -
23. The question that arises for consideration is whether the High Court,
on facts, was justified in referring the parties to arbitration by allowing
the Section 11(4) petition filed by the respondent?
24. The scope of jurisdiction of the referral court hearing a Section
11-Petition when faced with an issue of joinder of a non-signatory to
the arbitration agreement has been lucidly set out by the five-judge
Bench of this Court in Cox and Kings Limited vs. Sap India Private
Limited and Another1. Though said in the context of considering
the Group of Companies doctrine, the said judgment has a great
bearing for the present case. This Court, speaking through Chief
Justice D.Y. Chandrachud, held as under:-
“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
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
1 (2024) 4 SCC 1
[2025] 12 S.C.R. 467
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
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.]
101. A formalistic construction of an arbitration agreement
would suggest that the decision of a party to not sign an
arbitration agreement should be construed to mean that
the mutual intention of the parties was to exclude that
party from the ambit of the arbitration agreement. Indeed,
corporate entities have the commercial and contractual
freedom to structure their businesses in a manner to limit
their liability. However, there have been situations where
a corporate entity deliberately made an effort to be not
bound by the underlying contract containing the arbitration
agreement, but was actively involved in the negotiation
and performance of the contract. The level of the non-
signatory party’s involvement was to the extent of
making the other party believe that it was a veritable
party to the contract, and the arbitration agreement
contained under it. Therefore, the Group of Companies
doctrine is applied to ascertain the intentions of
the parties by analysing the factual circumstances
surrounding the contractual arrangements. [Gary Born,
International Arbitration Law and Practice, (3rd Edn., 2021)
at p. 1568.]
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; and third, the other
468 [2025] 12 S.C.R.
Supreme Court Reports
party has legitimate reasons to rely on the appearance
created by the non-signatory party so as to bind it to
the arbitration agreement.
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.
170.12. 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)
25. A careful reading of the above passage reveals that the referral
court should be prima facie satisfied that there exists an arbitration
agreement and as to whether the non-signatory is a veritable party.
It further holds that even if the referral court prima facie arrives at
the satisfaction that the non-signatory is a veritable party, the Arbitral
[2025] 12 S.C.R. 469
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
Tribunal is not denuded of its jurisdiction to decide whether the
non-signatory is indeed a party to the arbitration agreement on the
basis of factual evidence and application of legal doctrine. The Court
further reinforces this proposition by holding that as to whether the
non-signatory is bound would be for the Arbitral Tribunal to decide.
26. But what is primordial is that it should be demonstrated prima facie
before the referral court that the non-signatory is a veritable party.
According to the “Illustrated Oxford Dictionary (Revised Edition
2003)” the word:
“veritable” means “real; rightly so called
(a veritable feast)”,
In substance, it means truly, genuinely or for all intended purposes.
The referral court under Section 11 is not deprived of its jurisdiction
from examining whether the non-signatory is in the real sense a
party to the arbitration agreement. The answer thereof will depend
on the facts and circumstances of each case after examining the
documents pertaining thereto.
27. As was held in In Re: Interplay Between Arbitration Agreements
under Arbitration and Conciliation Act, 1996 & Stamp Act, 18992,
since the scope of referral court has to be within the parameter of
Section 11 (6-A), the exercise carried thereon is “examination of the
existence of an arbitration agreement”. While “examination” does not
contemplate a laborious or a contested inquiry there is an obligation
in the referral court to “inspect and scrutinize” the dealings, if any,
between the parties. Para 167 of Interplay (supra) reads as under:-
“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
2 (2024) 6 SCC 1
470 [2025] 12 S.C.R.
Supreme Court Reports
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. A similar
view was adopted by this Court in Shin-Etsu Chemical Co.
Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234]”
(Emphasis supplied)
28. This principle was reiterated lucidly in SBI General Insurance
Company Limited vs. Krish Spinning3, wherein this Court (speaking
through one of us, J.B. Pardiwala J.) observed as under:-
113. The scope of examination under Section 11(6-A) is
confined to the existence of an arbitration agreement on
the basis of Section 7. The examination of validity of the
arbitration agreement is also limited to the requirement of
formal validity such as the requirement that the agreement
should be in writing.
114. The use of the term “examination” under Section
11(6-A) as distinguished from the use of the term “rule”
under Section 16 implies that the scope of enquiry
under Section 11(6-A) is limited to a prima facie scrutiny
of the existence of the arbitration agreement, and does
not include a contested or laborious enquiry, which is
left for the Arbitral Tribunal to “rule” under Section 16.
The prima facie view on existence of the arbitration
agreement taken by the Referral Court does not bind
either the Arbitral Tribunal or the Court enforcing the
arbitral award.
115. The aforesaid approach serves a twofold purpose —
firstly, it allows the Referral Court to weed out non-existent
3 (2024) 12 SCC 1
[2025] 12 S.C.R. 471
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
arbitration agreements, and secondly, it protects the
jurisdictional competence of the Arbitral Tribunal to rule
on the issue of existence of the arbitration agreement in
depth.”
(Emphasis supplied)
29. Elaborating further as to the broad features to determine whether
a party is a veritable party or not, this Court in Ajay Madhusudan
Patel and others vs. Jyotrindra S. Patel and others4 (wherein one
of us, J.B. Pardiwala J.) held as under:-
“81. 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.”
30. Applying the above law to the present set of facts, we find that
even prima facie the respondent has not been able to establish that
it was a veritable party to the contract between HPCL and AGC.
HPCL has no privity at all with the respondent BCL. Admittedly, to
the documentation between AGC and BCL, HPCL was not a party.
After obtaining the contract from HPCL, AGC appears to have
engaged BCL to supply, install, integrate, test, commission and
grant warranty and post-warranty support services to AGC. In fact,
Clause 4 of the contractual arrangement of 15.01.2014 expressly
proscribes the Project Manager of the respondent-BCL to not make
any communication/coordination with HPCL without obtaining prior
written approval from AGC.
4 (2025) 2 SCC 147
472 [2025] 12 S.C.R.
Supreme Court Reports
31. Further, the Settlement Agreement of 31.10.2023 also is between
AGC and BCL and between them there is an arrangement that any
receivable accruing to AGC from HPCL shall stand transferred/
assigned to the respondent BCL. This does not mean that there is
an arbitration agreement existing between HPCL and BCL or that
BCL was a veritable party to the agreement between HPCL and AGC.
32. On the facts of this case, it is clear that the appellant and the
respondent have been operating on separate orbits. It has not been
established even prima facie that there was any intention to bind
BCL to the contract between HPCL and AGC.
33. Mr. Nalin Kohli, learned Senior Advocate, made a strenuous effort
to sustain the impugned judgment by relying on the judgment of this
Court in ASF Buildtech Private Limited vs. Shapoorji Pallonji and
Company Private Limited5, to contend that the Referral Court should
leave the matter to the Arbitral Tribunal to decide the issue. We have
carefully examined the judgment of this Court in ASF Buildtech
(Supra), authored by one of us J.B. Pardiwala J. We hold that the
judgment of this Court in ASF Buildtech (Supra) is in harmony with
the judgments of this Court in Interplay (Supra), Krish Spinning
(Supra), Cox & Kings (Supra), Ajay Madhusudan Patel (Supra)
and ASF Buildtech (Supra) does not sing any discordant note. For
the sake of convenience, the following crucial Paragraphs in ASF
Buildtech (Supra) are extracted hereinbelow: -
“110. Even if it is assumed for a moment that the Referral
Court in its jurisdiction under Section 11 of the 1996 Act
has the discretion to determine whether a non-signatory
is a veritable party to the arbitration agreement or not, by
virtue of Cox & Kings (1) [Cox & Kings Ltd. v. SAP (India)
(P) Ltd., (2024) 4 SCC 1, the Referral Court should only
refrain but rather loathe the exercise of such discretion.
Any discretion which is conferred upon any authority, be it
Referral Courts must be exercised reasonably and in a fair
manner. Fairness in this context does not just extend to a
non-signatory’s rights and its apprehension of prejudice,
fairness also demands that the arbitration proceedings
is given due time to gestate so that the entire dispute
5 (2025) 9 SCC 76
[2025] 12 S.C.R. 473
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
is holistically decided. Any determination even if prima
facie by a Referral Court on such aspects would entail an
inherent risk of frustrating the very purpose of resolution of
dispute, if the Referral Courts opine that a non-signatory
in question is not a veritable party. On the other hand, the
apprehensions of prejudice can be properly mitigated by
leaving such question for the Arbitral Tribunal to decide,
as such party can always take recourse to Section 16 of
the 1996 Act and thereafter in appeal under Section 37,
and where it is found that such party was put through the
rigmarole of arbitration proceedings vexatiously, both the
Tribunal and the courts, as the case may be, should not
only require that all costs of arbitration insofar as such
non-signatory is concerned be borne by the party who
vexatiously impleaded it, but the Arbitral Tribunal would
be well within its powers to also impose costs.
113.Cox & Kings (1) Cox & Kings Ltd. v. SAP (India)
(P) Ltd., (2024) 4 SCC 1, further observed that in case
of joinder of non-signatory parties to an arbitration
agreement, 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. However, it further clarified that, due
to the inherent complexity in determining whether the
non-signatory is indeed a veritable party, the Referral
Court should leave this question for the Arbitral
Tribunal to decide as it can delve into the factual and
circumstantial evidence along with its legal aspects
for deciding such an issue. The relevant observations
read as under: (SCC p. 90, paras 168-69)
“168. … Thus, when a non-signatory person or entity
is arrayed as a party at Section 8 or Section 11 stage,
the Referral Court should prima facie determine the
validity or existence of the arbitration agreement, as
the case may be, and leave it for the Arbitral Tribunal
to decide whether the non-signatory is bound by the
arbitration agreement.
169. In case of joinder of non-signatory parties to an
arbitration agreement, the following two scenarios
474 [2025] 12 S.C.R.
Supreme Court Reports
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.”
114. Thus, even if it is assumed for a moment, that the
question whether a non-signatory is a veritable party to
the arbitration agreement is intrinsically connected with the
issue of “existence” of arbitration agreement, the Referral
Courts should still nevertheless, leave such questions for
the determination of the Arbitral Tribunal to decide, as
such an interpretation gives true effect to the doctrine of
competence-competence enshrined under Section 16 of
the 1996 Act.
115. This hands-off approach of Referral Courts in relation
to the question of whether a non-signatory is a veritable
party to the arbitration agreement or not was reiterated in
Cox & Kings (2) [Cox & Kings Ltd. v. SAP (India) (P) Ltd.,
(2025) 1 SCC 611, wherein one of us, (J.B. Pardiwala, J.),
[2025] 12 S.C.R. 475
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
observed that once an Arbitral Tribunal stands constituted,
it becomes automatically open to all parties to raise any
preliminary objections, including preliminary objections
touching upon the jurisdiction of such tribunal, and to seek
an early determination thereof. Consequently, the issue of
impleadment of a non-signatory was deliberately left for the
Arbitral Tribunal to decide, after taking into consideration
the evidence adduced before it by the parties and the
principles enunciated under Cox & Kings (1) [Cox & Kings
Ltd. v. SAP (India) (P) Ltd., (2024) 4 SCC 1.”
34. In fact, ASF Buildtech (Supra) expressly notices the holding in Para
169 of Cox & Kings (Supra) to conclude that the Referral Court
was required to prima facie rule on the existence of the arbitration
agreement and whether the non-signatory was a veritable party. All
that it holds further in reiteration of the earlier line of judgments is
that even if the Court holds that prima facie a party is a veritable
party that will not foreclose the Arbitral Tribunal from concluding to
the contrary after an intensive inquiry.
35. This does not mean that where the Referral Court finds prima facie
a party is not a veritable party still the matter is left to the Arbitral
Tribunal. To hold so, would relegate the Referral Court to the status of
a monotonous automation. Further, to countenance such an extreme
proposition would lead to disastrous consequences, where absolute
strangers could walk into the Referral Court and contend that the
matter has to perforce go to the Arbitral Tribunal for a decision on
the veritable nature of the party. We are not prepared to accept such
an extreme proposition.
36. It could happen that one party having undertaken a contract from
the other may engage one or more third parties like in the present
case. In such a scenario, if there is nothing even prima facie to show
that there was any semblance of an intent to effect legal relationship
between that party and the party originally granting the contract
and/or to indicate that such a third party was a veritable party, such
parties cannot be found to be veritable parties. The following pertinent
observations from Cox and Kings (Supra) are relevant: -
“117. ….However, we clarify that mere presence of a
commercial relationship between signatory and non-
signatory parties is not sufficient to infer ‘legal relationship’
476 [2025] 12 S.C.R.
Supreme Court Reports
between and among the parties. If this factor is applied
solely, any related entity or company may be impleaded
even when it does not have any rights or obligations
under the underlying contract and did not take part in the
performance of the contract. The group of companies
doctrine cannot be applied to abrogate party consent and
autonomy….”
As pointed out earlier, on the facts of the present case, we hold that
the parties operated on separate orbits.
37. We are not impressed with the argument that the respondent had
a right to invoke the arbitration clause for the Indian Bidders in
the tender issued by the appellant, despite being a non-signatory,
since the respondent was a person claiming through or under
AGC. Reliance placed in this regard on Cox and Kings (supra)
is completely unjustified. As held in Cox and Kings (supra), mere
legal or commercial connection is not sufficient for a non-signatory
to claim through or under a signatory party. Para 140 of Cox and
Kings (supra) is extracted hereinbelow :-
“140. An analysis of the cases cited above establishes the
following propositions of law : first, the typical scenarios
where a person or entity can claim through or under a
party are assignment, subrogation, and novation; second,
a person “claiming through or under” can assert a right
in a derivative capacity, that is through the party to the
arbitration agreement, to participate in the agreement; third,
the persons claiming through or under do not possess
an independent right to stand as parties to an arbitration
agreement, but as successors to the signatory parties’
interest; and fourth, mere legal or commercial connection
is not sufficient for a non-signatory to claim through or
under a signatory party.”
38. Apart from the above, not only has the respondent not shown any
consent for assignment as required under clause 3.17 of the tender
document, nothing even prima facie has been shown to establish
that there was any semblance of an intent to effect legal relationship
between the respondent and the party originally granting the contract
and/or to indicate that the respondent was a veritable party.
[2025] 12 S.C.R. 477
Hindustan Petroleum Corporation Ltd. v.
BCL Secure Premises Pvt. Ltd.
39. It will be apt to refer to the judgment of this Court in Khardah
Company Limited vs. Raymon & Co.6 wherein this Court held as
under:-
“The law of the subject is well settled and might be stated
in simple terms. An assignment of a contract might result by
transfer either of the rights or of the obligations thereunder.
But there is a well-recognised distinction between these
two classes of assignments. As a rule obligations under
a contract cannot be assigned except with the consent of
the promise, and when such consent is given, it is really a
novation resulting in substitution of liabilities. On the other
hand rights under a contract are assignable unless the
contract is personal in its nature the rights are incapable
of assignment either under the law or under an agreement
between the parties.”
40. Applying the consensual theory or the non-consensual theory, the
respondent has not established its case to show even prima facie
the existence of an arbitration agreement between HPCL and the
respondent. Reference to copies of group emails being marked to
HPCL or the creation of an escrow account on account of the contract
between AGC and the respondent BCL, fall far short of making out
of a prima facie case. We have also perused the Settlement-cum-
Assignment Agreement between AGC and respondent-BCL dated
31.10.2023, and particularly clause 2.2 thereto. Under this clause,
AGC (Black Box) has represented and warranted that any amount/
receivables accruing to AGC (Black Box) as a result of litigation/
proceeding initiated by BCL against the HPCL was to be transferred
to BCL. Here again, the respondent fails the prima facie test of being
a veritable party to the arbitration agreement between HPCL and
AGC. As to what is the legal status otherwise of clause 2.2 of the
Settlement Agreement dated 31.10.2023 is not for us to comment
in the present proceeding.
41. The judgment in Pravin Electricals Private Limited vs. Galaxy Infra
& Engineering Private Limited7, cited by Mr. Nalin Kohli, learned
Senior Advocate, has no relevance to the present case. There was
6 [1963] 3 SCR 183
7 (2021) 5 SCC 671
478 [2025] 12 S.C.R.
Supreme Court Reports
a dispute between employer and the tendering party directly and the
dispute was as to whether there existed any agreement between
them. Hence, Pravin Electricals (Supra) is also of no help to the
respondent. Equally, the reliance on Cox & Kings Ltd. (2) vs. SAP
(India) Pvt. Ltd.8, does not carry the case of the respondent any
further. That case turned on its own facts. As is clear from para 34
of the said judgment, this Court felt that in view of the complexities
involved in the determination of the question as to whether the
respondent No.2 therein was a party to the arbitration agreement
or not, the matter was felt best left to the arbitral tribunal to take a
call. Unlike in Cox & Kings (2) (supra), the situation here is simple,
leaving us with no difficulty in arriving at the conclusion that we
indeed have arrived at.
42. In view of our holding on the issue of the non-existence of an
arbitration agreement between the parties herein, we are not required
to go into the issue of whether the claim was ex-facie time-barred.
43. For the reasons stated above, we allow the appeal and set aside the
judgment and order dated 07.04.2025 passed by the Learned Single
Judge of the High Court of Judicature at Bombay in Comm. Arbitration
Application No.125/2025. Comm. Arbitration Application No.125/2025,
on the file of the High Court of Judicature at Bombay, shall stand
dismissed. If the respondent has any other remedy available in
law, it is at liberty to pursue the same. If any such proceedings are
resorted to, they have to be decided in accordance with law and on
their own merits. No order as to costs.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Nidhi Jain
8 (2025) 1 SCC 611
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