top of page
  • Writer's pictureRahul Narayan

Supreme Court Upholds ‘Group of Companies’ Doctrine: Arbitration Agreement Can Bind Non-Signatories



In its judgement dated 6 December 2023 in Cox and Kings Ltd. v. SAP India Pvt. Ltd, (2023 INSC 1051) (“Cox and Kings”), a five Judge Bench of the Supreme Court (“SC”) has upheld the ‘Group of Companies’ doctrine (“GOCD”) whereby an arbitration agreement can bind non-signatories and has clarified the extent of its application under Indian law.


A panel comprising of three Judges of the Hon’ble SC, during the examination of an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Act”), expressed a desire to re-evaluate the legitimacy of the 'Group of Companies' doctrine within the Indian context. This re-evaluation was predicated on the argument that the doctrine is more grounded in economic efficiency than in legal principles. Scepticism was raised concerning the appropriateness of its application by Indian Courts. The majority opinion criticized the interpretation of the phrase 'claiming through or under' in Section 45 of the Act, as established in the case of Chloro Controls India Private Limited v. Severn Trent Water Purification[1]. It observed that subsequent decisions, namely in Cheran Properties Ltd v. Kasturi and Sons Ltd[2], Mahanagar Telephone Nigam Ltd. v. Canara Bank[3], and Oil and Natural Gas Corporation Ltd. v. Discovery Enterprises Pvt. Ltd.[4], had incorporated the doctrine in Sections 8 and 35 of the Act without a thorough examination of the interpretation of this phrase, leading to diverse applications of the doctrine.

The majority held that concepts like 'tight group structure' and 'single economic unit' cannot unilaterally bind a non-signatory to arbitration without explicit consent. The matter was referred to a larger Bench to interpret the phrase 'claiming through or under' in Sections 8, 35, and 45 of the Act. It was referred to a bench of five Judges to determine the validity of the 'Group of Companies' doctrine in Indian arbitration jurisprudence. 

Issues dealt with in Cox and Kings

  1. Whether the Group of Companies doctrine should be construed as a means of interpreting implied consent or intent to arbitrate between the parties; 

  2. Whether the judgment of Chloro Controls is correct;

  3. Whether the phrase “Claiming through or under” in Section 8 would be interpreted to include the ‘Group of Companies’ doctrine;

  4. At what stage is the doctrine applicable;

  5. Whether the doctrine should continue to be invoked based on the principle of ‘Single Economic Reality’;

  6. Whether the principles of alter ego or piercing the corporate veil can alone justify the pressing the Group of Companies doctrine into operation even in the absence of implied consent?

Discussion highlights

  1. The Hon’ble CJI Dr. D.Y. Chandrachud has delivered the judgment on behalf of the Bench, affirming the validity of the GOCD within Indian arbitration jurisprudence. The ruling establishes that companies within a group, even if not signatories to a specific arbitration agreement, could be bound by an arbitration agreement on account of mutual consent as established as a matter of fact in a particular case. Addressing the issue of establishing guidelines for the application of the doctrine, the Bench determined that arbitral tribunals possess the competence to make such determinations. The decision emphasized that the application of the doctrine should be contingent upon the unique facts and circumstances presented in each case, granting arbitral tribunals the discretion to assess its suitability based on the particulars before them.

  2. Prior to addressing the broader issue of the validity of the GOCD, the SC sought to clarify whether an arbitration agreement exclusively bound signatory parties. The Bench has affirmed that mutual consent serves as the “cornerstone” of arbitration, with a signature being the “most profound” expression of this consent to an arbitration agreement. However, the absence of a signature does not necessarily imply a lack of consent, particularly in cases involving multiple parties. In light of this, the SC determined that the more apt term is “non-signatory” rather than “third-party” to describe companies that have indicated their consent to arbitration through means other than a signature. According to the SC, a “non-signatory” is a “person or entity implicated in a dispute that is the subject matter of arbitration, even if it has not formally entered into an arbitration agreement”. The SC has stated that in order to ascertain the inclusion of non-signatory companies under the arbitration agreement, one must assess whether the non-signatory intended to “affect legal relations” with a signatory or has explicitly consented to be a party to the agreement.

  3. While the SC stressed on the importance of having a written arbitration agreement, it also emphasized the need to take into account the surrounding circumstances of the agreement. The requirement for a written arbitration agreement does not rule out the possibility of binding non-signatory parties, as long as there exists a clearly defined legal relationship between the signatories and the non-signatory parties.

  4. Further while clarifying the scope of Section 7 of the Act that deals with “arbitration agreement”, the SC opined that being bound by the arbitration agreement does not necessitate being a signatory to it and in instances involving non-signatories, courts are compelled to determine whether these entities, through their acts or conduct, have explicitly consented to be bound by the arbitration agreement or the contracts that encompass it.

  5. The SC in the case of Discovery Enterprises (supra), has refined and clarified the cumulative factors that courts and tribunals should take into account when determining whether a company within a group of companies is obligated by the arbitration agreement. To determine whether a company within a group of companies, which is not a signatory to an arbitration agreement, would still be bound by it, the law takes into account the following factors:

    1. The mutual intent of the parties;

    2. The relationship of a non-signatory to a party which is a signatory to the agreement;

    3. The commonality of the subject-matter;

    4. The composite nature of the transactions; and

    5. The performance of the contract.

  6. Referring to burden of proof, the SC stated that the party seeking joinder of a non-signatory bears the burden of proof of satisfying the other factors to the satisfaction of the court or tribunal, as the case may be.

  7. In the event of the inclusion of non-signatory parties in an arbitration agreement, two prominent scenarios arise: first, when a signatory party to an arbitration agreement seeks to include a non-signatory party, and second, when a non-signatory party itself seeks the activation of an arbitration agreement. In both scenarios, the referring court must preliminarily assess the existence of the arbitration agreement and whether the non-signatory is a legitimate party to it. Given the intricacies involved in making such determinations, the referring court should defer this decision to the arbitral tribunal. The arbitral tribunal can then assess whether the non-signatory party is genuinely a party to the arbitration agreement based on factual evidence and the application of legal doctrine.

  8. The current judgment challenges several observations made by the SC in Chloro Controls (supra), deeming them inaccurate. Firstly, it disputes the notion that the use of “any person” in Section 45 of the Act indicates an intention to broaden the scope beyond signatory parties. Secondly, regarding a multi-party contract, the SC originally asserted that a subsidiary company, “deriving” its fundamental interests from the parent contract, falls within the purview of “claiming through or under.” However, the SC now contends that these observations contradict the common law positions in Mayoralty and Commonalty & Citizens of the City of London v. Ashok Sancheti[1] and Tanning Research Laboratories Inc v. O’Brien[2]. These cases underscored that a mere legal or commercial connection is insufficient for a non-signatory to claim through or under a party to the arbitration agreement. Additionally, the SC referenced A. Ayyasamy v. A. Paramasivam[3], affirming that the Act should align with prevailing common law principles. Consequently, the SC held that even if a subsidiary benefits from a contract made by the group company, it does not fall under the term “claiming through or under” solely based on its legal or commercial relationship with the involved parties.

  9. The SC was tasked with elucidating whether the GOCD could be invoked under Section 45 of the Act. Section 45 empowers judicial authorities to refer parties to arbitration when one of the parties or any person claiming “through or under” them requests the same. Previously, in Chloro Controls (supra), a three-judge Bench of the SC had included non-signatory entities in the arbitration process, deeming them parties due to their involvement in ancillary agreements closely linked to the principal agreement. The Court reasoned that these non-signatory parties, being part of the same corporate group, were “subsidiaries in interest” eligible to claim “through or under” the signatories. However, in the instant case, the Bench clarified that the GOCD stands independently, and a non-signatory party included in arbitration via the GOCD is not joining the agreement “through or under” a signatory party. The non-signatory entity’s participation is grounded in mutual consent, allowing them to be directly included by applying the GOCD. Accordingly, the Bench held that the reasoning of the Court in Chloro Controls (supra) was erroneous.


In view of the above discussion, the SC arrived at the following conclusions:

  1. The definition of “parties” under Section 2(1)(h) read with Section 7 of the Act includes both the signatory as well as non-signatory parties;

  2. The conduct of the non-signatory parties could be an indicator of their consent to be bound by the arbitration agreement;

  3. The requirement of a written arbitration agreement under Section 7 of the Act does not exclude the possibility of binding non-signatory parties;

  4. Under the Act, the concept of a “party” is distinct and different from the concept of “persons claiming through or under” a party to the arbitration agreement;

  5. The underlying basis for the application of the GOCD rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the non-signatory party to the arbitration agreement;

  6. The principle of alter ego or piercing the corporate veil cannot be the basis for the application of the GOCD;

  7. The GOCD has an independent existence as a principle of law which stems from a harmonious reading of Section 2(1)(h) along with Section 7 of the Act;

  8. To apply the GOCD, the courts or tribunals, as the case may be, have to consider all the cumulative factors laid down in Discovery Enterprises (supra). Resultantly, the principle of single economic unit cannot be the sole basis for invoking the GOCD;

  9. The persons “claiming through or under” can only assert a right in a derivative capacity;

  10. The approach taken in Chloro Controls (supra) to the extent that it traced the GOCD to the phrase “claiming through or under” is erroneous and against the well-established principles of contract law and corporate law;

  11. The GOCD should be retained in the Indian arbitration jurisprudence considering its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements;

  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; and

  13. In the course of the present judgment, any authoritative determination given by it pertaining to the GOCD should not be interpreted to exclude the application of other doctrines and principles for binding non-signatories to the arbitration agreement.

The Application of the GOCD to bind non-signatories to arbitration proceedings has been a distinctive feature of arbitration law in India. However, the textual and theoretical basis of this has been ambiguous. The judgement in Cox and Kings brings far more conceptual clarity to this area of law.

Cox and Kings reaffirms two central principles of arbitration law. First, the central inquiry regarding the binding of non-signatories to an arbitration clause concerns consent, which is involves a factual inquiry into the circumstances rather than a purely economic calculation. Second, this factual inquiry must be carried out by the Arbitral Tribunal in accordance with the well-known principle of kompetenz kompetenz.

Cox and Kings will likely reduce the mechanical application of the GOCD by courts that often leads to Awards that can be challenged on the basis of jurisdiction over parties. The welcome clarification of the theoretical basis and practical import of the GOCD will allow a more balanced growth of this unique Indian contribution to arbitration jurisprudence.

[1] (2013) 1 SCC 641

[2] (2018) 16 SCC 413

[3] (2020) 12 SCC 767

[4] (2022) 8 SCC 42 

[5] 2008 EWCA Civ. 1283

[6] (1990) HCA 8

[7] (2016) 10 SCC 386


42 views0 comments


bottom of page