Published on: 08th October 2025
Authored by: Raj Sanjay Mitra
Faculty of Law, University of Delhi
Supreme Court Holding: The Supreme Court preserved the “group of companies doctrine” in Cox & Kings Ltd. v. SAP India Pvt. Ltd. & Anr., holding that non-signatory parties may be bound by an arbitration agreement if their actions, interactions with the signatories, and the nature of the business dealings indicate an intent to arbitrate.
Citation: 2023 INSC 1051
Bench: 5-Judge Constitution Bench
Judges: D.Y. Chandrachud CJI, P.S. Narasimha J, Hrishikesh Roy J, Manoj Misra J, J.B. Pardiwala J
Judgment Date: 6 December 2023
Keywords: group of companies, signatory party, non-signatories, arbitration
BACKGROUND
In international arbitration, the “group of companies doctrine” has been an evolving concept that addresses the complex reality of modern corporate structures. In the 2012 case of Chloro Controls India Private Limited v. Severn Trent Water Purification Inc., the Supreme Court of India acknowledged for the first time that a non-signatory party could be bound by an arbitration agreement when the non-signatory was asserting a claim “through or under” a signatory party.
This doctrine developed from the recognition that commercial dealings frequently involve intricate connections between multiple entities, such as parent corporations, subsidiaries, and corporate affiliates. The doctrine’s implementation was not without challenges, particularly in determining the specific circumstances under which a non-signatory could be bound by arbitration.
The Chloro Controls ruling was based on a broad interpretation of “claiming through or under” in Section 45 of the Arbitration and Conciliation Act, 1996 (the A&C Act). This led to ambiguous application of the doctrine in subsequent cases, prompting further legal scrutiny.
In the Chloro Controls decision, the Supreme Court also outlined specific factors that could obligate a non-signatory to participate in arbitration proceedings initiated under the Act. Later, in ONGC Ltd. v. Discovery Enterprises (P) Ltd., the Supreme Court identified several cumulative factors that should be evaluated before binding a non-signatory to arbitration proceedings. These included the relationship between the signatory and non-signatory, the mutual intent of the parties, the nature of the transaction, and the commonality of the subject matter.
FACTS OF THE CASE
The dispute in Cox & Kings Ltd. v. SAP India Pvt. Ltd. & Anr. arose from a disagreement between Cox & Kings Ltd. (the petitioner) and SAP India Pvt. Ltd. (the respondent) regarding the applicability of the group of companies doctrine. The petitioner had submitted an application under Section 11(6) of the A&C Act seeking the appointment of an arbitrator to resolve the dispute.
The matter was initially to be considered by a three-judge bench consisting of Chief Justice N.V. Ramana, Justice Surya Kant, and Justice A.S. Bopanna. The judges raised concerns regarding the doctrine’s suitability for the Indian context. In particular, the bench questioned whether it was appropriate to apply the doctrine in the same manner as Chloro Controlshad done, relying on the interpretation of the phrase “claiming through or under” in Section 45 of the A&C Act.
Recognising the need for greater clarity in defining the doctrine’s parameters and tracing its origins in the Arbitration and Conciliation Act, 1996, the three-judge bench referred the matter to a larger Constitution Bench. The reference sought interpretation of the expression “claiming through or under” in Sections 8, 35, and 45 of the Act.
LEGAL ISSUES RAISED
The primary concern in this case was whether non-signatories to an arbitration agreement could be bound by the “group of companies doctrine” in India. The Court was specifically requested to determine whether non-signatory parties—such as subsidiaries or associates of the signatories—could be compelled to arbitrate a dispute based on their connections within the corporate group.
The following legal issues were addressed by the Court:
- Can the group of companies doctrine bind non-signatories to an arbitration agreement?
- Is it appropriate to use the broad definition of “claiming through or under” as interpreted in Chloro Controls?
- What guidelines should apply when including non-signatories in arbitration proceedings?
JUDGMENT
The “Group of Companies Doctrine” Upheld
The five-judge Constitution Bench reached a unanimous decision that the doctrine possesses independent status as a legal principle. The Bench held that the doctrine derives from a coherent interpretation of Section 2(1)(h) read with Section 7 of the Act and is fundamentally embedded in Indian arbitration law. The Court emphasised the importance of preserving the doctrine within Indian arbitration jurisprudence due to its effectiveness in clarifying parties’ intentions in complex transactions involving multiple parties and agreements.
Consent is the Foundational Requirement of Arbitration
The Supreme Court determined that fundamental principles of contract law are applicable to arbitration proceedings. The Court noted that an arbitration agreement signifies the parties’ consent to resolve their disputes through arbitration. Consequently, contract law principles—such as privity of contract, consensus ad idem, and express or implied consent—apply to arbitration agreements, alongside the requirements outlined in Section 7 of the Act.
Both Signatories and Non-Signatories Can Be Parties to an Arbitration Agreement
The Constitution Bench unanimously held that Section 2(h) read with Section 7 does not explicitly mandate that a ‘party’ must be a signatory to the arbitration agreement or the underlying contract containing it. The Supreme Court concluded that the legislative intent behind Section 7 indicates that any legal relationship can be the subject of an arbitration agreement, even in the absence of a formal contract between the involved parties or entities. This interpretation aligns with prevailing trends in international arbitration legislation, which recognise that signatory status is not necessarily required for a party to be bound by arbitration proceedings.
“Parties” and “Those Claiming Through or Under” Are Distinct Categories
The Supreme Court, referencing Sections 8, 35, and 45 of the Act, clarified that the term ‘parties or any person claiming through or under’ uses ‘or’ as a disjunctive term. This allows for an alternative or choice between ‘parties’ and ‘any person claiming through or under.’ Consequently, the Court held that either a party to an arbitration agreement or any individual claiming through or under that party may apply to the judicial authority for referral of the dispute to arbitration.
The Group of Companies Doctrine and Corporate Separateness
The Court reaffirmed that the doctrine of separate corporate personality within a group of companies does not undermine the distinct legal identities of individual entities. The Court emphasised that the group of companies doctrine is not intended to disregard these separate identities but rather to acknowledge the collective commercial objectives and integrated operations of the group. The primary consideration should be whether the involved parties, through their conduct or mutual interests, demonstrated an intention to resolve disputes through arbitration.
The Alter Ego Theory Is Rejected
The Court explicitly rejected the application of the alter ego theory or the concept of piercing the corporate veil as a basis for implementing the group of companies doctrine. This clarification was significant, as it confirmed that the doctrine’s application would not rely on superficial or unfounded justifications such as veil-piercing. Instead, the focus must be on the commercial intent and the substantive relationships among the entities involved.
Cumulative Factors for Application
The Court referred to the Oil and Natural Gas Corporation Ltd. v. Discovery Enterprises Pvt. Ltd. (2022) case, which outlined cumulative considerations to be evaluated when applying the “group of companies doctrine.” These factors include:
- The relationship between the signatory and the non-signatory
- The nature of the transactions involved
- The mutual intention of the parties
- The commonality of subject matter across agreements
These factors ensure that the doctrine is applied judiciously, with careful consideration of the specific facts and circumstances of each case.
The Threshold Test for Binding Non-Signatories
The Court stated in paragraph 127 of the judgment that a balance must be struck between the consensual nature of arbitration and contemporary commercial reality, in which non-signatories may become involved in contractual relationships. To determine whether a non-signatory intended to be bound by the contract containing the arbitration agreement, the criteria outlined in Discovery Enterprises must be applied.
The non-signatory’s intention can be discerned by analysing whether they had positive, direct, and significant involvement in the contract’s negotiation, performance, or termination. Mere incidental participation in the contract’s negotiation or performance cannot imply consent to the underlying contract, much less to the arbitration agreement.
Furthermore, the party seeking to join a non-signatory to the arbitration agreement bears the burden of demonstrating, through objective evidence, the non-signatory’s conscious and purposeful engagement with the contractual relationship.
CONCLUSION AND IMPACT
The Supreme Court’s decision in Cox & Kings Ltd. v. SAP India Pvt. Ltd. & Anr. represents a landmark development in Indian arbitration law. By upholding the group of companies doctrine while establishing clear parameters for its application, the Court has harmonised Indian arbitration jurisprudence with international standards while ensuring that the principles of equity and commercial efficiency are maintained.
The judgment establishes several key principles:
Recognition of Non-Signatories as Parties: Depending on the relationship between entities, both signatories and non-signatories may be included within the A&C Act’s definition of “party.”
Conduct-Based Consent: A non-signatory’s conduct and engagement with the contract may indicate consent to arbitration, even without formal signature.
Preservation of Corporate Identity: The group of companies doctrine acknowledges shared commercial purpose without disregarding the separate legal identities of corporate entities.
Rejection of Veil-Piercing Rationale: The doctrine cannot be applied through piercing the corporate veil or the alter ego theory; it must be grounded in genuine commercial integration and mutual intent.
Burden of Proof: The party seeking to bind a non-signatory bears the burden of demonstrating conscious and purposeful engagement through objective evidence.
This decision provides much-needed clarity and predictability to Indian arbitration practice. It ensures that the arbitration process remains accessible, efficient, and compliant with international standards while protecting the consensual foundation of arbitration. The judgment strikes an appropriate balance between recognising modern commercial realities and safeguarding parties’ autonomy in choosing their dispute resolution mechanisms.
REFERENCES
- Cox & Kings Ltd. v. SAP India Pvt. Ltd. & Anr., 2023 INSC 1051
- Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. and Ors., (2013) 1 SCC 641
- Cox & Kings Ltd v. SAP India Pvt Ltd & Anr, Case Briefs, LawBhoomi, (December 2023), https://lawbhoomi.com/cox-kings-ltd-v-sap-india-pvt-ltd-anr/ (last visited 25 April 2025)
- Arbitration and Conciliation Act, 1996
- Oil and Natural Gas Corporation Limited v. M/S Discovery Enterprises Private Limited & Another, (2022) 8 SCC 42
- Khaitan Legal Associates, Cox & Kings Limited vs. SAP India Private Limited – Judgment Summary, Lexology, (2 January 2024), https://www.lexology.com/library/detail.aspx?g=4fb001bc-d70b-4a2c-a72f-2c4bc465d63b (last visited 25 April 2025)
- Cox and Kings Ltd. vs. SAP India Pvt. Ltd., Case Brief, PSL Advocates and Solicitors, (December 2023)
