This Supreme Court judgment holds that a non-signatory to an arbitration agreement has no legal right to be present in the arbitral proceedings as the award would not bind them, violating the confidentiality mandate under Section 42A. Furthermore, a court becomes functus officio after appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, and cannot entertain subsequent applications for intervention or issue ancillary directions.
Facts Of The Case:
The case originated from an oral family settlement between Pawan Gupta (PG) and Kamal Gupta (KG), later recorded in a Memorandum of Understanding/Family Settlement Deed (MoU/FSD) dated 09.07.2019, which was not signed by KG’s son, Rahul Gupta (RG). PG initiated proceedings under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator as per the MoU/FSD. RG, a non-signatory, filed an intervention application opposing this. A separate petition under Section 9 for interim measures was also filed. On 22.03.2024, the court appointed a sole arbitrator, dismissed RG’s intervention plea, and directed the Section 9 petition to be treated as a Section 17 application before the arbitrator. Subsequently, RG and other non-signatory companies filed applications in the disposed-of Section 11(6) proceedings, seeking permission to be present in the arbitration and to recall the earlier order. On 12.11.2024, the court permitted RG to remain present in all arbitral proceedings and issued directions concerning properties of the intervenor companies, which were challenged in the present appeal.
Procedural History:
The procedural history began with the filing of an arbitration petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointing a sole arbitrator, alongside a separate petition under Section 9 for interim measures. The High Court, in its order dated 22.03.2024, appointed the arbitrator, dismissed the intervention applications filed by the non-signatory respondents, and disposed of both petitions. Subsequently, the non-signatories filed fresh interim applications in these already disposed-of proceedings, seeking intervention and recall of the order. The High Court, vide the impugned order dated 12.11.2024, entertained these applications and granted the non-signatories permission to be present in the arbitration. This order was challenged in the Supreme Court through special leave petitions, which were converted into the present civil appeals.
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Court Observation:
The court observed that a non-signatory to an arbitration agreement is a stranger to the proceedings and has no legal right to participate or be present, as an arbitral award binds only the parties to the agreement under Section 35. It further held that after appointing an arbitrator under Section 11(6), the court becomes functus officio and cannot entertain subsequent applications for intervention or issue ancillary directions. The court also emphasized that permitting a non-signatory to attend violates the confidentiality of arbitral proceedings mandated under Section 42A of the Act and constitutes judicial intervention beyond the scope of the self-contained arbitration code, which is limited to what is expressly provided for in its provisions.
Final Decision & Judgement:
The Supreme Court allowed the appeals and set aside the impugned order of the High Court dated 12.11.2024. It held that the applications filed by the non-signatory respondents in the disposed-of Section 11(6) proceedings were not maintainable as the court had become functus officio. The permission granted for a non-signatory to be present in the arbitration was declared without jurisdiction, as it violated the confidentiality mandate under Section 42A and the principle that an award only binds parties to the agreement. The parties were directed to act in accordance with the original appointment order dated 22.03.2024, and costs of ₹3,00,000 were imposed on the respondents.
Case Details:
Case Title: Kamal Gupta & Anr. vs M/S L.R. Builders Pvt. Ltd & Anr. Etc. CITATION: 2025 INSC 975 Civil Appeal No: (Arising out of SLP (Civil) Nos. 4775-4779/2025) Date of Judgement: August 13, 2025 Judges/Justice Name: Justice PAMIDIGHANTAM SRI NARASIMHA and Justice ATUL S. CHANDURKAR
Download The Judgement Here