Arbitration is based on consent, and ordinarily only those who sign an arbitration agreement are bound by it. But corporate groups often negotiate and perform contracts through several entities, and the question of whether a non-signatory group company can be bound has come up repeatedly.
In Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2023), a Constitution Bench of the Supreme Court upheld the group of companies doctrine in Indian arbitration law. The Court held that the definition of "parties" in the Arbitration and Conciliation Act, 1996 includes both signatories and non-signatories, and that a non-signatory may be bound where the circumstances show a mutual intention of the parties to bind it.
The Court identified factors relevant to that intention, including the non-signatory's participation in the negotiation, performance and termination of the contract, the relationship between the entities, the commonality of subject matter, and the composite nature of the transaction. Mere membership of the same group is not enough.
This matters for both claimants and respondents. A claimant may be able to bring a parent or affiliate that controlled performance into the arbitration. A group company that took an active role in a contract should recognise that it may be bound even without signing.
The practical lesson: in group transactions, decide deliberately which entities should be parties, and make sure the contract documents reflect that choice.
This note summarises the reported judgment for general information and is not legal advice on any specific matter.