In a significant ruling, the Supreme Court has clarified that non-signatories to an arbitration agreement have no right to attend arbitration proceedings and that courts become functus officio once an arbitrator is appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996. The decision, arising from a family property dispute, sets aside a Delhi High Court order that had allowed a non-signatory family member to observe arbitration and issued directions affecting property rights. The Court emphasised confidentiality under Section 42A, minimal judicial intervention under Section 5, and the self-contained nature of the Arbitration Act.
Case Title: Kamal Gupta & Anr. v. M/s L.R. Builders Pvt. Ltd. & Anr.
Court: Supreme Court of India
Citation: Arising out of SLP (Civil) Nos. 4775-4779/2025
Bench: Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar
Date of Judgment: 13 August 2025
Factual Background
1. Family Dispute and MoU/FSD
- The dispute arose within the Gupta family, between Pawan Gupta (PG) and Kamal Gupta (KG).
- On 20 June 2015, an oral family settlement was reached, later reduced to a Memorandum of Understanding/Family Settlement Deed (MoU/FSD) dated 9 July 2019.
- Rahul Gupta (RG), son of KG, did not sign the MoU/FSD.
2. Arbitration Proceedings
- PG and another member initiated proceedings under Section 11(6) of the Act, seeking the appointment of a sole arbitrator to resolve disputes under the MoU/FSD.
- RG, a non-signatory, sought to intervene in both the Section 11(6) proceedings and related Section 9 proceedings for interim measures.
- The Delhi High Court, by order dated 22 March 2024, appointed a sole arbitrator and directed that the Section 9 petition be treated as a Section 17 application to be decided by the arbitrator.
- The High Court rejected RG’s intervention applications on the ground that he was not a signatory and would not be bound by any arbitral award.
3. Fresh Applications Post-Appointment
On 5 August 2024, RG and two non-signatory companies filed I.A. No. 37567 of 2024 in the disposed Section 11(6) proceedings seeking:
Permission to remain present in arbitration proceedings.
Revival of their earlier intervention applications.
Access to pleadings, orders, and awards.
- Another application, I.A. No. 39500 of 2024, sought recall of the 22 March 2024 order.
- On 7 August 2024, the High Court allowed RG and other non-signatories to be present in arbitration, personally or through counsel.
On 12 November 2024, the High Court:
- Made this permission absolute.
- Directed that properties belonging to the intervenor companies remain outside arbitration.
- Limited arbitration to 77% of certain properties.
- Recognised RG’s 23% share in the family corpus.
Contentions Before the Supreme Court
Appellants (PG and KG)
- Lack of jurisdiction: After the 22 March 2024 order, the Court became functus officio under Section 11(6).
- Section 35: Arbitral awards bind only parties and those claiming under them; RG, a non-signatory, would not be bound, hence no right to attend.
- Section 42A: Allowing non-parties to attend breaches confidentiality of arbitration.
- Review in disguise: The High Court effectively revisited and reversed its earlier rejection of intervention.
- Autonomy of arbitration: Judicial directions undermined arbitral independence.
Respondents (RG and Non-signatories)
- Breach of undertakings given by PG and KG justified intervention.
- Reliefs granted were a natural consequence of undertakings recorded in the 22 March 2024 judgment.
- Invoked Section 151 CPC for inherent powers to prevent injustice.
- No review of 22 March order occurred; only consequential directions were issued.
Issues for Determination
- Can a non-signatory remain present in arbitration proceedings between signatories to an agreement?
- After appointing an arbitrator under Section 11(6), can the court issue further directions in the disposed proceedings?
Supreme Court’s Reasoning
1. Presence of Non-Signatories
- Section 35: Awards bind only parties and persons claiming under them.
- Section 2(h): “Party” means a party to an arbitration agreement.
- Since RG and others were not signatories, they were strangers to the arbitration.
- Arbitration is confined to signatories; allowing strangers to attend has no statutory basis.
- Remedy for a non-party lies under Section 36 if enforcement is attempted against them.
- Section 42A mandates confidentiality; non-party attendance breaches this.
No legal right exists for a non-signatory to be present; the High Court’s permission was without jurisdiction.
2. Court’s Powers Post-Section 11(6) Appointment
- Once an arbitrator is appointed and proceedings disposed of, the court is functus officio.
- Section 5: Minimal judicial intervention—courts cannot act beyond what Part I of the Act permits.
- The Act is a self-contained code; matters must be addressed as specified, not through general CPC powers unless expressly allowed.
- Invoking Section 151 CPC to permit intervention post-appointment is impermissible.
- The High Court erred in entertaining applications filed months after the disposal of the main proceedings.
3. Abuse of Process
- Filing fresh applications in disposed proceedings amounted to reopening closed matters.
- Attempt to gain indirectly what was earlier refused directly (intervention rights).
- The Court observed this was an abuse of process, warranting costs.
Key Legal Principles Evolved
Non-signatories & Arbitration Attendance
- A non-signatory cannot claim presence in arbitral proceedings unless they fall within Section 35 (party or claiming under a party).
- Confidentiality under Section 42A is a barrier to non-party attendance.
Functus Officio Doctrine in Section 11(6) Context
- After appointing an arbitrator, the court’s jurisdiction under Section 11(6) ends.
- Ancillary or new reliefs post-appointment are beyond jurisdiction.
Limits of Judicial Intervention
- Section 5 reinforces that courts cannot intervene unless expressly provided in Part I.
- The Arbitration Act, being a self-contained code, excludes the application of general procedural provisions like Section 151 CPC unless specified.
Abuse of Process & Re-litigation
- Reintroducing claims rejected earlier amounts to abuse of process.
Decision
- Appeals allowed.
- High Court order dated 12 November 2024 set aside in its entirety.
- Parties must work out their rights per the 22 March 2024 order.
- Costs of ₹3,00,000 imposed on respondents, payable to the Supreme Court Advocates-On-Record Association within two weeks.
Significance of the Judgment
This ruling clarifies:
- The non-permissibility of non-signatories observing the arbitration unless they are bound by the award.
- The strict limits on a court’s role after arbitrator appointment under Section 11(6).
- The importance of confidentiality in arbitration.
- Functus officio applies strictly to Section 11(6) proceedings.
Critical Analysis
The Supreme Court’s decision is consistent with:
- Party Autonomy: Arbitration is consensual; outsiders cannot participate without consent or statutory right.
- Confidentiality: Section 42A aims to protect sensitive commercial/family dispute details.
- Minimal Judicial Intervention: Prevents courts from micromanaging arbitration once commenced.
- Procedural Discipline: Avoids misuse of court processes for indirect relief.
It also reinforces earlier precedents such as:
- Nimet Resources Inc. v. Essar Steels Ltd. (2009) 17 SCC 313
- Re: Interplay between Arbitration Agreements and Indian Stamp Act (2023 INSC 1066)
- Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. (2022) 1 SCC 75
Conclusion
The judgment strengthens the autonomy, confidentiality, and integrity of arbitration in India. It draws a clear boundary: once a court appoints an arbitrator, it must step aside, and only the arbitral tribunal can control the proceedings between the parties to the agreement. Non-signatories, unless directly bound, have no standing to observe or influence the proceedings.
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