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INDIA 74
Supreme Court of India, 6 December 2023
(Cox and Kings Ltd v. SAP India Pvt Ltd. & Anr)
INDIA 74
The Constitution Bench of the Supreme Court clarified the Indian approach to the application of the “group of companies” theory in respect of the issue whether a nonsignatory is bound to the arbitration agreement in a contract. Indicating the relevant factors to be taken into account, the Court concluded that a nonsignatory is bound when its involvement in the relationship underlying the dispute is such as to make the parties believe that the nonsignatory is a party. The Court also held that, at the stage where referral of the dispute to arbitration is sought, the referral court should leave it for the arbitral tribunal to decide whether a nonsignatory is bound by the arbitration agreement. By this decision, the Court overruled the approach taken in Chloro Controls (INDIA 49) in 2012, which it deemed to be erroneous.
The court discusses the meaning and effect of the referral of the resolution of disputes to arbitration, including: who can ask for referral and when, whether a party has waived its right to request arbitration, the defense that there was no contract at all; whether there was a condition precedent to the commencement of arbitration (e.g. mediation), stay of proceedings v. compelling arbitration, and national procedural specificities such as remand and removal (US), effect of class action. etc.
The court discusses the principle of competence-competence, including whether the parties “intended to have arbitrability decided by an arbitrator”, and the separability of the arbitration agreement from the main contract.
Multi-party disputes: The court discusses under which conditions non-signatories are covered by an arbitration agreement entered into by another party.