- The Supreme Court announced a significant decision in which it expanded the scope of arbitration agreements to include non-signatories under certain situations.
- This decision focuses on the “group of companies” theory within the context of arbitration agreements.
‘Group of Companies’ Doctrine
| Details | |
| Essence | Non-signatory corporate entities in the same group as a signatory can be bound by an arbitration agreement. |
| Basis on Mutual Intent | Both signatories and non-signatory group members are bound by the joint intention. |
| Arbitration as a Tool | Provides an alternative to court litigation, with binding rulings made by neutral arbitrators. |
| Root in International Jurisprudence | It is based on international arbitration practices rather than domestic legislation. |
| Indian Legal Precedent | Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. (2013) lawsuit. |
| Criteria for Application | The Indian Supreme Court defines mutual purpose, entity relationship, common subject matter, transaction character, and contract execution. |
| Objective | Attempts to avoid conflict fragmentation in multi-party transactions that are complicated. |
| Recent Supreme Court Ruling | The grounds under which non-signatories can be bound by arbitration agreements have been clarified, with an emphasis on legal ties and shown intents. |
Source: https://www.scobserver.in/cases/group-of-companies-doctrine-in-arbitration-proceedings/