Two non-signatories whose partnership depends on the disputed retirement deed are veritable parties to the arbitration

Justices J.B. Pardiwala and K. Vinod Chandran modified a Section 11 order, holding on a prima facie view that the outcome would substantially affect the absent parties' rights.

Who counts as a party to an arbitration when the dispute will decide the fate of someone who never signed the agreement? The judgment opens by calling it a vexing question that comes up oftener than ever, and one that has to be determined more on the facts, with multiple aspects that cannot be put into a strait jacket formula. On 12 October 2026 the Supreme Court held that two non-signatories were veritable parties to an arbitration over a commercial unit at Worli in Mumbai, and modified the High Court's order to that extent.

What the High Court decided

The dispute concerns ownership of a unit of about 3,500 square feet on the ground floor of a commercial centre at Worli. In an application under Section 11 of the Arbitration and Conciliation Act, 1996, the High Court first took up limitation, which mattered because there had been an earlier arbitral award at the instance of the appellants themselves that was set aside under Section 34. It answered limitation in the appellants' favour, but only as against the first and second respondents.

The prayer to join the third and fourth respondents in the arbitration was declined. The High Court's reason was that they are not signatories to the arbitration agreement and do not fall within the recognised exceptions — neither persons claiming through or under a signatory, nor covered by the group of companies doctrine.

Fifty years of reconstituted partnerships

The asset originally belonged to a firm whose partnership deed was executed in April 1977 between three family trusts, and which acquired the Worli unit in October 1977. In December 1985 the partnership was reconstituted by the deed that carries the arbitration clause, bringing in the appellants on one side and the first and second respondents on the other. In December 1987 another deed reconstituted the firm again and the original partners retired. In July 1995 came a deed of retirement under which the appellants are said to have left the firm — a document the appellants allege is forged.

In July 2005 the second respondent retired, which the respondents say dissolved the firm, after which the business continued as a proprietorship with its assets vested in the first respondent. By a deed of September 2009 the third and fourth respondents were brought in as partners of that proprietorship, constituting a new partnership, and by a deed of November 2009, on the retirement of the first respondent, the third and fourth respondents continued as partners of the firm.

The positions are irreconcilable. The third and fourth respondents distance themselves from the 1985 partnership agreement, which is the one containing the arbitration clause. The first and second respondents say the firm dissolved when the second respondent retired, after the appellants had already gone. The appellants say they never retired at all, that the partnership continues to this day, and that the asset belongs to the original partnership.

What Cox & Kings supplies, and what it does not

The Single Judge had relied on Cox & Kings Limited v. SAP India Private Limited and Hindustan Petroleum Corporation Limited v. BCL Secure Premises Private Limited. The Supreme Court held that the principle of claiming through or under, and the group of companies doctrine as elaborated in Cox & Kings, do not apply to these proceedings — but that the reasoning in that case still helps.

Arbitration law, Cox & Kings holds, is an autonomous legal field, distinct from corporate law and contract law: the main purpose of those is the imputation of substantive legal liability, whereas the law of arbitration determines whether a tribunal has jurisdiction over disputes between parties to an arbitration agreement. A non-signatory, by not putting pen to paper, indicates an intention not to assume rights or responsibilities under the agreement. Even so, courts and tribunals cannot adopt a rigid approach that excludes every person or entity which, through conduct and relationship with the signatories, intended to be bound by the underlying contract containing the arbitration clause.

Why their rights are in play

The Supreme Court looked at what the arbitration would actually decide. The dispute revolves around the ownership of the subject asset, and whether it passes by virtue of a deed of 1985 or a deed of 2009. The third and fourth respondents hold under a partnership deed of November 2009, in which neither the appellants nor the first and second respondents are partners — and that partnership deed can be valid only if the deed by which the appellants retired is valid.

On those facts the Court held that the third and fourth respondents are veritable parties to the dispute, because its outcome would substantially affect their rights as well. The absence of their signature on the 1985 partnership deed does not answer the question, where the very instrument under which they claim stands or falls with what the arbitration decides.

What was left open

The Court was careful about the weight of its own finding. It recorded in terms that the finding on the third and fourth respondents being veritable parties is a prima facie finding, which would not govern the adjudication of that issue before the arbitral tribunal.

Two defences in particular survive. The questions of limitation raised by the third and fourth respondents remain alive, as does their contention that the appellants are estopped from including them, because they were not included in the earlier arbitration proceedings even though the retirement deed was known to the appellants at that time. Both are left to be agitated before the tribunal.

Order

The impugned order was modified only to the extent of finding the third and fourth respondents to be veritable parties to the arbitration, despite their not being signatories to the partnership deed of 1985. With those observations and that modification the appeal was disposed of, and pending applications rejected.