Supreme Court of India

Ajay Madhusudan Patel vs Jyotrindra S. Patel on 20 September, 2024

Author:
Dhananjaya Y. Chandrachud

Bench:
Dhananjaya Y. Chandrachud

2024 INSC 710 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

ARBITRATION PETITION NO. 19 OF 2024

AJAY MADHUSUDAN PATEL & ORS. …PETITIONERS

VERSUS

JYOTRINDRA S. PATEL & ORS. …RESPONDENTS

JUDGMENT

Signature Not Verified

Digitally signed by

Sanjay Kumar

Date: 2024.09.20

14:51:12 IST

Reason:

Arbitration Petition No. 19 of 2024 Page 1 of 67

J. B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided in the following parts:

INDEX

A. FACTUAL MATRIX .................................................................................. 3

B. SUBMISSIONS ON BEHALF OF THE PETITIONER (AMP
GROUP) ............................................................................................................ 25

C. SUBMISSIONS ON BEHALF OF THE RESPONDENT (JRS
GROUP) ............................................................................................................ 31

D. SUBMISSIONS ON BEHALF OF THE RESPONDENT (SRG
GROUP) ............................................................................................................ 32

E. ANALYSIS ................................................................................................. 38

i. Scope of jurisdiction of the referral court under
Section 11(6)
of the
Act, 1996......................................................................................................... 38

ii. Whether on a prima facie view, the SRG Group being a non-

signatory to the FAA, can be referred to arbitration? .............................. 55

F. CONCLUSION .......................................................................................... 66

1. The present petition has been filed under Section 11(6) read with
Section

11(9)
of the Arbitration and Conciliation Act, 1996 (hereinafter, “the Act,

1996”) seeking appointment of a Sole Arbitrator to adjudicate the disputes

between the Petitioners and the Respondents in terms of Clauses 7.2 and

7.3 respectively of the Family Arrangement Agreement dated 28.02.2020

Arbitration Petition No. 19 of 2024 Page 2 of 67

(hereinafter, “the FAA”) read with the Amendment Agreement dated

15.05.2020 (hereinafter, “Amendment to the FAA”) entered into between

the petitioner AMP Group and respondent JRS Group.

2. Since the Petitioner No. 13 i.e., Silvercity Management Ltd. is a company

incorporated outside India having its office at 17, Bond Street, St. Helier,

Jersey, JE2, 3NP, an island in the English Channel, northwest of France and

the Petitioner No. 14 i.e., Hiral Ashit Patel is an individual, who is a citizen

and resident of Canada, the dispute between the Parties falls within the

definition of an international commercial arbitration under
Section 2(1)(f)

of the Act, 1996.

A. FACTUAL MATRIX

3. For convenience, the Parties involved in the present petition and the

respective groups of which they form a part of are tabulated below:

S.NO NAME PETITIONER/ GROUP

RESPONDENT

1. Ajay Madhusudan Patel Petitioner No. 1 AMP

2. Apoorva Madhusudan Patel Petitioner No. 2 AMP

3. Meeta Ajay Patel Petitioner No. 3 AMP

4. Sonal Apoorva Patel Petitioner No. 4 AMP

Arbitration Petition No. 19 of 2024 Page 3 of 67

5. Bhavik Ajay Patel Petitioner No. 5 AMP

6. Jinal Ajay Patel Petitioner No. 6 AMP

7. Kaushal Apoorva Patel Petitioner No. 7 AMP

8. Nishkal Apoorva Patel Petitioner No. 8 AMP

9. Apoorva M. Patel (HUF) Petitioner No. 9 AMP

10. Spectrum Ingredients Pvt. Ltd. Rep. by Petitioner No. 10 AMP

its Director

11. Sai Fragrances & Flavours Pvt. Ltd. Rep. Petitioner No. 11 AMP

by its Director

12. Zest Aromas Pvt. Ltd. Rep. by its Petitioner No. 12 AMP

Director

13. Silvercity Management Ltd. Rep. by its Petitioner No. 13 AMP

Chairman

14. Hiral Ashit Patel Petitioner No. 14 AMP

15. Jyotrindra S. Patel Respondent No. 1 JRS

16. Rajesh C. Patel HUF Respondent No. 2 JRS

17. Sanjay S. Patel Respondent No. 3 JRS

18. Finhelp Investments and Consultants Respondent No. 4 JRS

(Mumbai) Pvt. Ltd. Rep. by its Director

19. Greenbiz Holdings and Consultants Pvt. Respondent No. 5 JRS

Ltd. Rep. by its Director

Arbitration Petition No. 19 of 2024 Page 4 of 67

20. Jyotrindra S. Patel and Sanjay S. Patel Respondent No. 6 JRS

(Holding for and on behalf of J&S

Associate – AOP) Rep. by its Member

21. Millenium Estates Pvt. Ltd. Rep. by its Respondent No. 7 SRG

Director

22. Deegee Software Pvt. Ltd. Rep. by its Respondent No. 8 SRG

Director

23. Samarjitsinh R. Gaekwad (Shareholder Respondent No. 9 SRG

& Director of Millenium Estates Pvt. Ltd.

and Deegee Software Pvt. Ltd.)

24. Radhikaraje S. Gaekwad (Shareholder of Respondent No. SRG

Deegee Software Pvt. Ltd.) 10

25. Subhanginiraje R. Gaekwad Respondent No. SRG

(Shareholder of Deegee Software Pvt. 11

Ltd.)

26. Gaekwad Services Ltd. now known as Respondent No. SRG

Gaekwad Enterprise Pvt. Ltd. Rep. by its 12

Managing Director (Shareholder of

Deegee Software Pvt. Ltd.)

Arbitration Petition No. 19 of 2024 Page 5 of 67

27. Samarjitsinh Gaekwad HUF Respondent No. SRG

(Shareholder of Deegee Software Pvt. 13

Ltd.)

28. Rajesh C. Patel (Shareholder of Deegee Respondent No. JRS

Software Pvt. Ltd.) 14

29. Shilpa R. Patel (Shareholder of Deegee Respondent No. JRS

Software Pvt. Ltd.) 15

30. Aditya Patel (Director of Deegee Respondent No. SRG

Software Pvt. Ltd.) 16

31. Nitin Shripadbhai Pujari (Director of Respondent No. SRG

Deegee Software Pvt. Ltd.) 17

4. The Petitioners herein are collectively referred to as the “AMP Group”. The

Petitioner Nos. 1 to 9 & 14 respectively are individuals and family members

of Mr. Ashit Patel, who are a part of the AMP Group in the FAA. The

Petitioner Nos. 10 to 13 respectively are companies described as a part of

the AMP Group in the FAA. The Petitioner No. 13 is a company

incorporated outside India and the Petitioner No. 14 is a resident of a foreign

country.

5. The Respondents are divided into two groups i.e., “JRS Group” consisting

of Respondents 1 to 6, 14 & 15 and “SRG Group” consisting of

Arbitration Petition No. 19 of 2024 Page 6 of 67

Respondents 7 to 13, 16 & 17. The Millenium Estates Pvt. Ltd. (hereinafter,

“Millenium”) and Deegee Software Pvt. Ltd. (hereinafter, “Deegee”) are

Respondent 7 and 8 companies respectively. The Respondents 9 to 17 are

all either Directors or Shareholders of Respondent 7 and 8 companies.

Therefore, the Respondents comprise of individuals, Companies and

Shareholders and Directors of the respective companies dealt with under

the FAA.

6. Apart from the Petitioners and Respondents aforementioned, a few other

individuals find a repeated mention in the facts of the present petition. First,

Mr. Ashit M. Patel who is the Power of Attorney Holder of Petitioner Nos.

1 to 9 and 14 of the AMP Group. He is the co-brother of Respondent No.1.

Secondly, Mr. Kalpesh Parmar, a Chartered Accountant who represented

the interests of the JRS Group during the negotiations leading up to the

FAA, the implementation of the FAA and the first round of mediation. He

is alleged to have also represented the interests of the SRG Group during

the same. In the last, Mr. Pankaj Agarwal, an employee of Deegee.

7. Mr. Ashit Patel representing the AMP Group and Mr. Jyotrindra S. Patel

(Respondent No.1) of the JRS Group are co-brothers and married in the

same family. The two groups were jointly engaged in various businesses

and co-owned several entities. Subsequently, the SRG Group had joined

Arbitration Petition No. 19 of 2024 Page 7 of 67

hands with the AMP Group and JRS Group in two entities i.e. Millenium

and Deegee. SRG Group presently holds 40% equity shares in Millenium.

8. It is the case of the Petitioners that between 2013 & 2019, various disputes

arose between the AMP Group on one side and the JRS and SRG Groups

on the other which led to the filing of several proceedings before various

forums including the National Company Law Tribunal (hereinafter,

“NCLT”) at New Delhi, Mumbai and Ahmedabad by the AMP Group. The

same are still pending before the respective forums. It is pertinent to note

that, of the aforesaid disputes, the respondent No.9 of the SRG Group is one

of the respondents in CP/383/2017 pertaining to Deegee, filed by the AMP

Group before the NCLT at Mumbai.

9. The Best Value Chem. Ltd. (hereinafter, “BVC”) is an entity involved in

the business of manufacturing aroma chemicals co-owned by the AMP and

JRS Groups. The Premji Group had initiated a proposal to buyout BVC and

indicated that the deal could only go through if the litigations filed against

BVC were withdrawn. Therefore, the parties thought it fit to resolve all the

issues between them once and for all with the understanding that the AMP

Group would completely takeover various entities and that the JRS and

SRG Groups would co-own other entities.

Arbitration Petition No. 19 of 2024 Page 8 of 67

10. During negotiations that preceded the execution of the FAA, the following

events/communications took place;

• Vide emails dated 12.12.2019 and 02.01.2020, several internal documents

required for the valuation of Millenium and Deegee were shared by Mr.

Pankaj Agarwal with the AMP Group wherein a copy was marked to Mr.

Kalpesh Parmar.

• Vide email dated 14.01.2020 sent to the AMP Group, Mr. Kalpesh Parmar

confirmed that the matters pertaining to Millenium and Deegee even after

its valuation may have to be discussed with Mr. Samarjitsinh (hereinafter,

“Respondent No. 9”) of the SRG Group before finalisation. The said

excerpt from the contents of the email are reproduced hereinbelow:

“…The pending details from Pankaj, if I correctly
understand then it is related to documents of Millenium and
Deegee, Even if we consider both of it to be treated
separately, it can be done because even after valuation, the
matter needs to be discussed out with Samarjitsinh before
finalising. Therefore, in the binding agreement you can put
necessary points covering both the properties and till it is not
resolved we can work out some alternate solution so that
both the groups are covered properly….”
(Emphasis supplied)

• A joint meeting was arranged by Mr. Kalpesh Parmar and attended by Mr.

Ashit Patel of the AMP Group and Respondent No.9 of the SRG Group.

• Vide email dated 25.01.2020 sent to the AMP Group, Mr. Kalpesh Parmar

suggested that the valuation of Millenium be finalized in consultation with

Arbitration Petition No. 19 of 2024 Page 9 of 67

the Respondent No.9 of the SRG Group. The said excerpt from the contents

of the email are reproduced hereinbelow:

“…In view of releasing above deadlock situation, I am
suggesting that we include in FAA binding methodology to
resolve it. For Chandan Sanjaybhai, Jagdishbhai & AMP
can sit and decide the value within __ days from execution of
FAA, Similarly for Millenium Sanjaybhai, Samarjitsinh &
AMP can sit and close it along with issue of residential flats.
This can also be done within __ days from execution of FAA.
In the meantime, whatever valuation/s so far JRS has given
on Chandan & Millenium will stand withdrawn, so nothing
is there on table from JRS side on the value of Chandan &
Millenium. Therefore, we can proceed to close on FAA &
Escrow agreement on Monday. If you can flip this suggestion
with AMP, I can try to convince Sanjaybhai too…”
(Emphasis supplied)

11. Subsequently, the FAA dated 28.02.2020 was entered into between the

AMP Group and JRS Group. The terms of the FAA impose several

obligations on the AMP and JRS Groups in pursuance of the settlement

contemplated therein.

12. It is pertinent to observe that the present petition relates primarily to the

dispute arising from specific clauses wherein the SRG Group is also

required to undertake certain steps and actions specified viz, (a) Clause 2.1.4

read with Schedule 7 on Millenium Exit (presently AMP Group holds 36%

while SRG Group holds 40%) where AMP Group is required to exit and

SRG Group is required to purchase additional shares; (b) Clause 2.1.5

requiring Amendment of Lease Deed executed between Millenium, the

Arbitration Petition No. 19 of 2024 Page 10 of 67

Lessor and Aurosagar Estates Pvt. Ltd. (hereinafter, “Aurosagar”), the

Lessee and; (c) Clause 2.1.6 read with Schedule 8 on Deegee Exit where

JRS and SRG Groups are required to completely exit and AMP Group

would purchase the shares. The relevant clauses of the FAA are reproduced

hereinbelow:

“2.1.4 Exit of AMP Group from Millenium

(a) Within 30 (thirty) days from the Trigger Date(“Millenium
Transfer Date”), Parties shall execute duly stamped
agreement(s) with SRG to record and finalize their
understanding with respect to exit of AMP Group from
Millenium by way of transfer/ buy back of all Class A equity
shares in Millenium (“Millenium Exit”) in the manner set
out in Schedule 7. The Parties agree that the valuation of
Millenium for the purposes of the Millenium Exit shall be
INR 130,00,00,000 (Rupees One Hundred Thirty Crores). It
is hereby clarified that AMP Group will continue to hold
Class B equity shares in Millenium in accordance with the
provisions set out in the articles of association of Millenium.

(b) Notwithstanding anything contained herein, Parties shall
endeavour to simultaneously undertake the Millenium Exit
and Deegee Exit on the same day in accordance with Clause
2.1.4 and Clause 2.1.6, respectively.

(c) Parties shall co-operate with each other for any actions
required to be undertaken or documents required to be
executed in order to give effect to the actions contemplated
under this Clause, including but not limited to passing
exercising their voting rights to provide necessary board or
shareholders' approval, execution and stamping of share
transfer forms, endorsement of share certificates, filing
forms with the registrar of companies, making entries in
statutory registers, providing all necessary information and
documents necessary for preparing necessary documents,
etc required to be complied by Millenium under Applicable
Law.

Arbitration Petition No. 19 of 2024 Page 11 of 67

2.1.5 Amendment of Aurosagar Lease Deed

(a) On the Millenium Transfer Date, Aurosagar and
Millenium shall execute a duly stamped amendment deed to
the Aurosagar Lease Deed in the format set out in Annexure

1.

(b) Parties shall co-operate with each other for any and all
such actions required to be undertaken and execute all such
documents as may be necessary in order to give effect to this
Clause (Including registration of the amendment deed),
including but not limited to exercising their voting rights to
provide necessary board or shareholders' approval,
attending office of registrar of assurance for admitting the
amendment deed, providing all necessary information and
documents necessary for preparing necessary documents,
etc.

(c) All costs and expenses for amendment of the Aurosagar
Lease Deed in accordance herewith, including without
limitation, fee charged by attorneys and other
advisors/consultants, stamp duty and registration charges
shall be borne by AMP Group.

2.1.6 Exit of JRS Group and SRG from Deegee Software

(a)Within 30 (thirty) days from the Trigger Date ("Deegee
Transfer Date"), Parties shall and shall ensure that SRG
executes duly stamped agreement(s) to record their
understanding with regards to exit of JRS Group and SRG
from Deegee Software, including (i) transfer of all shares
held by JRS Group and SRG in Deegee Software ("AMP
Deegee Transfer"); (ii) resignation of directors appointed by
JRS Group/SRG from the board of directors of Deegee
Software; and (iii) repayment of loan by Deegee Software to
its lenders including the interest accrued thereon in the
manner set out in Schedule 8 ((i), (ii) and (iii) are collectively
referred as "Deegee Exit")

(b) AMP Group shall complete due diligence of Deegee
Software within 20 (twenty) Business Days from the
Execution Date, in the event, there are any findings requiring

Arbitration Petition No. 19 of 2024 Page 12 of 67

indemnity by AMP Group from JRS Group and/or SRG the
same will be mutually agreed between the parties.

(c) Parties shall co-operate with each other for any actions
required to be undertaken or documents required to be
executed for giving effect to the actions contemplated under
this Clause, including but not limited to exercising their
voting rights to provide necessary board or shareholders'
approval, execution and stamping of share transfer forms,
endorsement of share certificates, filing forms with the
registrar of companies and the Reserve Bank of India,
making entries in statutory registers, providing all necessary
information and documents necessary for preparing
necessary documents, etc required to be complied by Deegee
Software under Applicable law. AMP Group shall be
responsible for all compliances/filings under foreign
exchange laws of India in relation to the AMP Deegee
Transfer.

xxx xxx xxx

SCHEDULE 7
MILLENIUM EXIT

In connection with Millenium Exit, the Parties have agreed
the following:

1. AMP Group will exit from Millenium. The total value of
Millenium has been fixed at INR 130,00,00,000 and AMP
Group's share of 36% out of total value of Millenium will be
INR 46,80,00,000.

2. Phase–1 - SRG will purchase approx. 11% shares of AMP
Group post receipt of Balance JRS Purchase Price in the JRS
Designated Bank Account. JRS Group proposes to provide
necessary funding to SRG for purchasing shares held by
AMP Group in Millenium.

3. Phase 2 - Millenium will buy back the balance shares of
AMP Group i.e., approx. 25% from the funds to be received
from Deegee Software. Any tax in relation to such buyback
to be borne by AMP Group.

Arbitration Petition No. 19 of 2024 Page 13 of 67

4. Phase 3 - within 12 months from execution of relevant
documents in respect of Millenium Exit, Millenium will
separate out the Class "B" shares being residential flat
owners in a separate co-operative society.

5. Until co-operative society is not formed, Millenium will
provide no objection letter to AMP Group for transfer of
their flats.

SCHEDULE 8
DEEGEE EXIT

In connection with Deegee Exit, the Parties have agreed the
following:

1. JRS Group and SRG will exit from Deegee Software. AMP
Group will discuss with Jabalpur Group and finalise on their
exit. The total value of the property owned by Deegee
Software is fixed at INR 141,00,00,000, which shall be used
to pay off loans with proportionate interest to all lenders of
Deegee Software.

2. The sale proceeds received by AMP Group from sale of
shares as per Phase 1 of Millenium Exit, will be brought in
Deegee Software by AMP Group.

3. AMP Group will bring further funds in Deegee Software
to pay off entire loan provided by Millenium to Deegee
Software along with interest at the rate of 14.50% p.a.
compounded annually.

4. Simultaneously, with repayment of loans to Millenium as
per paragraph 3 above, (i) Deegee Software to pay off entire
loan provided by JRS Group and SRG along with interest at
the rate of 14.50% p.a. compounded annually; and (ii)
shares of Deegee Software held by JRS Group and SRG shall
also be transferred to AMP Group.

5. The above exercise to be completed within 12 months from
the execution of relevant documents in this regard.”
(Emphasis supplied)

Arbitration Petition No. 19 of 2024 Page 14 of 67

13. Post the execution of the FAA and in pursuance of the implementation

thereof, the following communications were exchanged:

• Vide emails dated 12.03.2020 and 13.03.2020 sent to the AMP Group, Mr.

Pankaj Agarwal shared documents required for the due diligence of Deegee

which were marked to Mr. Kalpesh Parmar and the latter email was

additionally marked to the respondent No.9 of SRG Group.

• Vide emails dated 24.04.2020 and 04.05.2020 sent to the AMP Group, the

JRS Group lawyers shared the FAA Closing Tracker reflecting the status of

implementation of the FAA which included the pending transfer of Deegee

and Millenium. The same were marked to Mr. Kalpesh Parmar.

• Vide email dated 08.05.2020 sent to a shareholder of BVC, Mr. Kalpesh

Parmar acted as the representative of the SRG Group on discussions

pertaining to the amendment of the Aurosagar lease deed. The said excerpt

from the contents of the email are reproduced hereinbelow:

“….On Aurosagar point, this email I am sending to put
forward views of Samarjitsinh (SRG) and not JRS. SRG is
clear that Millenium can give POA to AMP and his
immediate family and as agreed in FAA draft, PL can work
on language without disturbing the construct / concept. SRG
is not going to honour any POA which is beyond what is
stated in the draft of POA shared with him even though you
find any logical point in AMP’s arguments. As per him AMP
is neither trustworthy nor a reliable person, so he is not
interested in dealing any further with him. He already had a
very bad experience of similar nature when he had sealed a
deal with TATAs, that time also after signing the minutes,
AMP took extreme U-turn just for SRG to become a laughing
stock not only in front of all partners and HDFC Realty but
also in front of TATAs. That’s enough for him.

Arbitration Petition No. 19 of 2024 Page 15 of 67

Please appreciate, though SRG is not a signatory to FAA, he
is ready to honour what was agreed with him over phone call
but on other side there is a person though has signed a
document is now not ready to stick to it. Real mockery.

I would suggest that seriously you should take this with
Sanjaybhai & Shaju before approaching PI. My hands are
tied on this since I have to safeguard interest of SRG….”
(Emphasis supplied)

• Vide email dated 11.05.2020 sent to the AMP Group on discussions

pertaining to the Aurosagar Lease deed, Mr. Kalpesh Parmar indicated

that Respondent No.9 is the only decision maker in Millenium and JRS

is at best the facilitator if needed. The said excerpt from the contents of

the email are reproduced hereinbelow:

“…..The newly inserted points mentioned in the lease deed
vide clause nos. 2.8, 2.9 (including 2.9.1 to 2.9.4), 2.10 and
2.11 cannot be considered as part of the draft of lease deed
for following reasons:…..

…4. While your newly inserted points suggest that they are
having a futuristic impact so this can very well be taken up
in due course with Millenium when Samarjitsinh is the only
decision maker and JRS is at best the facilitator if needed…”
(Emphasis supplied)

14. An Amendment to the FAA was executed between the AMP Group and

JRS Group on 15.05.2020. The clauses relevant to the present dispute are

reproduced hereinbelow:

“5. Clause 2.1.5(a) stands deleted in its entirety and is
substituted with the following:

Arbitration Petition No. 19 of 2024 Page 16 of 67

On the Millenium Transfer Date, Aurosagar and Millenium
shall simultaneously execute the following: (i) duly stamped
amendment deed to the Aurosagar Lease Deed in the format
set out in Annexure 1; (ii) duly stamped irrevocable special
power of attorney in favour of Aurosagar in the format set
out in Annexure 1A; and (iii) duly stamped deed of indemnity
in the format set out in Annexure 1B.

6. Clause 2.1.6(b) stands deleted in its entirety and is
substituted with the following:

AMP Group shall complete due diligence of Deegee
Software on or before June 30, 2020. In the event, there are
any findings requiring indemnity by AMP Group from JRS
Group and/or SRG the same will be mutually agreed between
the parties in writing.

xxx xxx xxx

12. Paragraph 27 in Schedule 4 stands deleted in its entirety
and is substituted with the following:

"Transaction Documents" means this Agreement, the
Settlement Escrow Agreement and any and every document
executed in connection with the transaction contemplated
under or in connection with this Agreement.”
(Emphasis supplied)

15. In continuation of the implementation of the FAA, the following

communications were exchanged;

• Emails dated 01.07.2020, 10.04.2021 and 15.04.2021 were exchanged

between the AMP Group and Mr. Kalpesh Parmar pertaining to the due

diligence of Deegee.

• Vide email dated 09.10.2020 sent to the AMP Group, the JRS lawyers

shared drafts of the Share Purchase Agreements (hereinafter, “SPAs”)

Arbitration Petition No. 19 of 2024 Page 17 of 67

pertaining to Millenium and Deegee and a copy was marked to Mr.

Kalpesh Parmar.

• Vide email dated 27.11.2020 and a reminder email dated 03.04.2021, Mr.

Kalpesh Parmar sent the drafts of these SPAs (with AMP Group

comments) to the SRG lawyers with a copy marked to Respondent No.9

in order to seek their comments.

• Vide email dated 26.03.2021 sent to the AMP Group with a copy marked

to the Respondent No.9, Mr. Kalpesh Parmar clarified that though the

SPAs related to Deegee was stuck up with a non-JRS Group, yet the JRS

Group was ready to hand over the affairs of Deegee w.e.f. 01.04.2021

and requested the AMP Group to withdraw all litigations before the

concerned forums.

• Vide email dated 03.04.2021 sent to the JRS Group with a copy marked

to the Respondent No.9, the AMP Group requested the JRS Group to

undertake steps for restoring the original shareholding of the AMP Group

in Deegee.

16. Several items under the FAA were pending implementation including the

finalisation and execution of SPAs for Millenium and Deegee at the end of

the SRG Group. Therefore, vide email dated 20.12.2021 sent to the JRS

Group, the AMP Group nominated Mr. Upen Shah as the AMP Group’s

representative in compliance with clause 7.1.2 of the FAA for amicable

Arbitration Petition No. 19 of 2024 Page 18 of 67

resolution of the issues arising out of the FAA between the AMP and JRS

Groups. Vide reply email dated 26.12.2021, the JRS Group named Mr.

Sanket Jain and/or Mr. Kalpesh Parmar as their representative. Clause 7.1.2

is reproduced hereinbelow:

“7.1.1 The Parties agree to use all reasonable efforts to
resolve any dispute, controversy, claim or disagreement of
any kind whatsoever between or amongst any of the Parties
in connection with or arising out of this Agreement or the
Transaction Document/s executed in connection with the
transaction contemplated under or in connection with this
Agreement, including any question regarding its existence,
validity or termination ("Dispute"), expediently and
amicably to achieve timely and full performance of the terms
of this Agreement or the Transaction Document/s.

7.1.2 Any Party which claims that a Dispute has arisen must
give notice thereof to the other Parties as soon as practicable
after the occurrence of the event, matter or thing which is the
subject of such Dispute and in such notice, such Party shall
provide particulars of the circumstances and nature of such
Dispute and of its claim(s) in relation thereto and shall
designate a Person as its representative for negotiations
relating to the Dispute, which Person shall have authority to
settle the Dispute. The other Parties shall, within 7 (seven)
days of such notice, each specify in writing its position in
relation to the Dispute and designate as their representative
in negotiations relating to the Dispute, a Person with similar
authority.”

17. The first round of mediation was held between the representatives of the

AMP and JRS Groups on 19.01.2022. However, the discussions on the

issues did not lead to any conclusion. While the minutes of the same were

shared with Mr. Kalpesh Parmar, he denied its contents and stated that the

Arbitration Petition No. 19 of 2024 Page 19 of 67

draft minutes do not correctly record the events which occurred at the

meeting.

18. For the purpose of initiating the second round of mediation, an email dated

06.05.2022 was sent by the JRS Group to the AMP Group invoking Clause

7.1.2 and they nominated Mr. Anuj Trivedi or Mr. Kalpesh Parmar to act as

their representatives. In response to the same, on 23.05.2022, the AMP

Group nominated Mr. Keyur Gandhi and/or Mr. Upen Shah and/or Mr.

Nihar Mehta as their representatives. The first mediation meeting was

convened on 13.06.2022. The second mediation meeting was convened on

23.07.2022 wherein it was stated by the petitioners that the AMP and JRS

Groups were agreeable to hold a joint meeting with SRG for the purpose of

resolving the major issues pertaining to Millenium and Deegee.

19. In the midst of mediation, on 17.10.2022, the JRS Group sent a WhatsApp

message to the AMP Group stating that (a) the JRS Group had a meeting

with the SRG Group, (b) SRG and Millenium were ready to purchase the

stake of AMP Group in Millenium at the price agreed in the FAA, (c) SRG

would exit from Deegee subject to a payment of Rs. 25 crore as

compensation considering its contribution to the growth of Deegee. The

contents of the message are reproduced hereinbelow:

“ Dear Keyurbhai.

Arbitration Petition No. 19 of 2024 Page 20 of 67

My clients had a meeting with SRG and the following points
have been suggested by SRG:

(1) Millennium:

(a) SRG and Millennium would be ready to purchase the
stake of AMP in Millennium at the price already agreed AMP
and JRS

(b) The said purchase would be made from the compensation
that SRG receives from AMP for handling, taking care of and
making Deegee prosperous over the last 20 years. The said
compensation would be used for purchasing 11% of the 36%
stake of AMP in Millennium.

(c) The balance 25% would be "buy back" by Millennium of
AMP shares. This would be subject to the receipt of loan and
interest by Millennium & SRG from Degee

(2) Amendment to AoA: Millennium and SRG are of the
opinion that AoA does not need to be amended

(3) Aurosagar Lease Deed: the lease of Millennium and
Aurosagar is as per the plans sanctioned by the Municipal
Corporation. The draft lease deed provided is in
contradiction to the said sanctioned plans.

(4) Aurosagar Special Power of Attorney: Millennium and
SRG are of the opinion that there is no required of a Special
Power of Attorney.

(5) Deegee

(a) SRG will exit from Deegee, however, the same has been
formed and promoted by SRG, SRG has also given its name
in order to avoid the conflict of interest of AMP with
Firmenich. SRG has taken care of the company for the last

20 years and has provided services without any
renumeration. In view thereof, for exiting Deegee, SRG is
expecting compensation of Rs.25 crores

(b) Millennium and SRG are also expecting interest 14.50%
till repayment of the amount lent to AMP

JRS Group has suggested that we may have another meeting
and try to take it forward”.

(Emphasis supplied)

Arbitration Petition No. 19 of 2024 Page 21 of 67

20. Further on 21.11.2022, the JRS Group sent another WhatsApp message to

the AMP Group stating that it had spoken to the SRG Group and that if the

AMP Group was not ready to recognise SRG’s contribution in the growth

of Deegee, it would be difficult for them to agree with the AMP Group on

any point. The contents of the message are reproduced hereinbelow:

“Talked with SRG and here is the response-

As he understands from me that AMP group is looking
forward for meeting with SRG to discuss the points
forwarded by SRG, however AMP Grp would not like to give
any compensation for Deegee to SRG. As per SRG, if AMP
Grp is not even ready to recognize his contribution in growth
of Deegee, then it would be difficult for him to meet AMP
Grp for any point and thereby the points sent by SRG shall
be considered as non existent and should not be referred any
time in future.”
(Emphasis supplied)

21. Vide email dated 16.05.2023 sent to the AMP Group, Mr. Kalpesh Parmar

conveyed that he would discuss with SRG and try to resolve all matters

pertaining to Deegee and would also intimate the outcome of his discussion.

It was also conveyed that Millenium can be simultaneously worked out

once Deegee is settled. The contents of the email are reproduced

hereinbelow:

“Dear Nihar,

Based on my discussions with JRSG, following are the
comments:

[…]

4. All Deegee points we will discuss and try to resolve with
SRG and Jabalpur Group. The outcome, we will update you.

Arbitration Petition No. 19 of 2024 Page 22 of 67

However, we expect to complete other companies/entities as
per excel chart, which is concerning only JRSG & AMPG,
subject to the comments herein without putting any deadlines
for Deegee.

5. About Millenium, once Deegee is settled. Millenium can
be simultaneously worked out.

6. Escrow should be released along with the signing of
consent terms of Aurosagar.

7. As informed earlier Aurosagar's SPOA & Lease Deed
points can be directly dealt with SRG.

You may consider above comments and discuss. You may
thereafter make necessary changes in your comments in the
excel file and resend it”.

(Emphasis supplied)

22. Since mediation between the parties yielded no result, the JRS Group sent

an Arbitration Notice dated 11.12.2023 to the AMP Group invoking

Clauses 7.2 and 7.3 respectively contained in the FAA dated 28.02.2020

read with the Amendment to the FAA dated 15.05.2020. The JRS Group,

in the said notice, alleged, inter alia, that while the JRS Group had fulfilled

its obligations under the FAA, the AMP Group had failed to discharge and

take appropriate steps in compliance of its obligations. On account of such

failure, the JRS Group was unable to fulfil its corresponding obligations

and hence, disputes had arisen between the parties. They nominated Justice

Kalpesh S. Jhaveri (Former Chief Justice, High Court of Orissa) to act as

the sole arbitrator to resolve and adjudicate the disputes only between the

Arbitration Petition No. 19 of 2024 Page 23 of 67

AMP Group and JRS Group, in accordance with the FAA. The arbitration

clause contained in the FAA is reproduced hereinbelow:

“7.2 Any Dispute, if not resolved in accordance with Clause
7.1, shall be referred to and finally resolved by arbitration
in accordance with the
Arbitration and Conciliation Act,
read with the rules framed thereunder ("
Arbitration
Act
"). Subject to any interim reliefs/orders granted, this
Agreement and the rights and obligations of the Parties
contained in this Agreement shall remain in full force and
effect pending issuance of the award in such arbitration
proceedings, which award, if appropriate, shall determine
whether and when any termination shall become effective.

7.3 The arbitral tribunal shall consist of a sole arbitrator
mutually agreed upon and appointed by the Parties. Failing
such agreement, either Party shall be at liberty to seek
appointment of a sole arbitrator by preferring an
appropriate application in accordance with the
Arbitration
Act
before the jurisdictional Court or arbitral institution, as
the case may be, at Ahmedabad.”

23. On 12.01.2024, the AMP Group gave its reply to the aforesaid notice and

sent it to both the JRS and SRG Groups. The AMP Group, while denying

the contents of the Arbitration Notice, alleged, inter alia, that, it is the JRS

Group that had failed to perform their part of the obligations under various

pretext despite the AMP Group pursuing the same. It stated that the

assertion on the part of the JRS Group that SRG Group was not bound by

the terms of the FAA since it is not a signatory to the said document was

completely contrary to what had been represented to AMP during the

negotiations and at the time of execution of the FAA and further the same

Arbitration Petition No. 19 of 2024 Page 24 of 67

was made only for the purpose of raising an extra monetary demand of Rs.

25 crore which was never contemplated under the FAA. It was further stated

that Mr. Kalpesh Parmar and the JRS Group had represented the SRG

Group at all stages including the mediation process. The appointment of

Justice Akil Kureshi (Former Chief Justice, High Court of Rajasthan) was

suggested as an arbitrator for adjudication of all disputes arising under the

FAA between the AMP, JRS and SRG Groups.

24. On 09.02.2024 and 10.02.2024 respectively, the JRS Group and SRG

Group responded to the reply to the Arbitration Notice sent by the AMP

Group.

25. Upon failure to reach an agreement on the appointment of the Sole

Arbitrator within 30 days, the Petitioner AMP Group has filed the present

Arbitration Petition No. 19 of 2024 before this Court.

B. SUBMISSIONS ON BEHALF OF THE PETITIONER (AMP

GROUP)

26. Mr. Darius Khambata, the learned senior counsel appearing on behalf of

the petitioners submitted that although the SRG Group is not a signatory to

the FAA dated 28.02.2020 which contains the arbitration clause, yet it is a

veritable party to the arbitration agreement since they participated in the

Arbitration Petition No. 19 of 2024 Page 25 of 67

negotiations leading up to the FAA and continued to talk with the parties

on the issues pertaining to the implementation of the FAA.

27. It was submitted that the successful implementation of the FAA was

contingent on the involvement and action of the SRG Group and it was the

intention and understanding of all the parties, including the SRG Group,

that they would adhere to, and act on the terms of the FAA. The same was

submitted to be evident through the following:

• The email dated 14.01.2020 by which Mr. Kalpesh Parmar stated that

the valuation of Respondent Nos. 7 and 8 respectively can be finalized

only in consultation with the SRG Group;

• A joint meeting that took place between Mr. Kalpesh Parmar, Mr. Ashit

Patel and Respondent No.9 during which Respondent No.9 represented

that Mr. Kalpesh Parmar was also representing the interest of the SRG

Group in the negotiations and that SRG would be bound by the final

terms agreed with Mr. Kalpesh Parmar and JRS Group;

• The email dated 08.05.2020 by which Mr. Kalpesh Parmar asserts that

SRG is ready to honour what was agreed in the FAA and that he has to

safeguard the interest of SRG in the implementation of the FAA.

• Even after the execution of the FAA, important emails dated

13.03.2020, 27.11.2020, 26.03.2021 and 03.04.2021 respectively were

sent by the JRS Group/Kalpesh Parmar wherein SRG (Respondent

Arbitration Petition No. 19 of 2024 Page 26 of 67

No.9) was marked and has not objected to the contents thereof or raised

any grievance.

• During the mediation process, the SRG Group had communicated

through a JRS Group representative that it is ready and willing to

perform its obligations under the FAA if its demand for an additional

consideration of Rs. 25 Crore for exit from Respondent No. 8 company

is accepted by the AMP Group.

28. The Counsel submitted that the execution of the terms of the FAA required

the involvement and action of the SRG Group while also benefitting them.

It was submitted that a perusal of the following clauses and schedules of the

FAA would indicate that the transaction was one of separation of

shareholding and businesses of the three groups viz AMP, JRS and SRG:

• Clause 2.1.4 read with Schedule 7 provides that AMP Group would exit

from Respondent No. 7 Company i.e. Millenium (where the SRG Group

already holds 40%) and that out of the 36% shares held by the AMP

Group, 11% will be purchased by the SRG Group and the remaining

25% will be bought back by Respondent No. 7 Company. The valuation

of Respondent No. 7 Company is provided as Rs. 130 crore.

• Clause 2.1.6 read with Schedule 8 provides that the JRS and SRG

Groups shall exit the Respondent No. 8 Company i.e. Deegee by selling

their shares to the AMP Group. Sale proceeds received by the AMP

Arbitration Petition No. 19 of 2024 Page 27 of 67

Group on its exit from the Respondent No. 7 company will be brought

into the Respondent No. 8 Company. The valuation of Respondent No.

8 Company is provided as Rs. 141 Crore.

• Clause 2.1.7 read with Item 10 of Schedule 3 provides that the AMP

Group shall withdraw CP 383/2017 filed against the Respondent No. 8

Company where Respondent No.9 is also a party.

29. The counsel submitted that the Share Purchase Agreements (SPAs) were to

be executed to facilitate the implementation of Clauses 2.1.4 and 2.1.6

respectively of the FAA and the SRG Group would have been a party to the

SPAs. This is evident from the draft SPAs and the same were forwarded

specifically to the respondent No.9 vide email dated 27.11.2020. That

according to the dispute resolution clause contained in Clauses 7.1 and 7.2

respectively, disputes between or amongst any of the parties in connection

with or arising out of the Transaction Documents can be amicably resolved

and upon its failure, be resolved by arbitration. The term “Transaction

Documents” is defined as “means this Agreement, the Escrow Agreement

and any and every document executed in connection with the transaction

contemplated under or in connection with this Agreement” and also

includes the SPAs to be executed inter alia the SRG Group, the drafts of

which were forwarded to the SRG Group on 27.11.2020.

Arbitration Petition No. 19 of 2024 Page 28 of 67

30. It was submitted that the AMP Group has conducted the due diligence of

the Respondent No.8 Company i.e., Deegee as contemplated in Clause

2.1.6(b) of the FAA with the full knowledge and consent of the SRG Group.

The same is evident vide emails dated 01.07.2020, 23.10.2020, 10.04.2021

and 15.04.2021 respectively. This demonstrated that the FAA had also been

partly implemented qua the SRG Group which is in management of the said

company.

31. One another submission made by the counsel was that the nomenclature of

the agreement i.e., “Family Arrangement Agreement” is irrelevant. In

addition to that, the description and obligation of the parties under the FAA

is also irrelevant since most cases of non-signatory parties will involve

agreements, the terms of which do not expressly include the non-signatory.

In support of the aforesaid, the counsel placed reliance on the decision of

this Court in
Sasan Power Ltd. v. North American Coal Corporation

(India) Private Ltd.
reported in (2016) 10 SCC 813 where it was settled

that the nomenclature of an agreement is not determinative of its character.

32. The counsel submitted that while on many occasions the representatives of

JRS Group were there to take care of the interests, suggestions and

comments of the SRG Group, it was understood by all the parties that the

SRG Group although not a signatory to the FAA yet would be a part of the

execution of and compliance of the terms and conditions thereof. Therefore,

Arbitration Petition No. 19 of 2024 Page 29 of 67

there was commonality of subject matter and composite transactions, in

view of which SRG is a veritable party liable to be referred to arbitration.

33. By placing a strong reliance on the decision of this Court in
Cox and Kings

Ltd. v. SAP India Pvt. Ltd.
reported in (2024) 4 SCC 1, the counsel

submitted that the settled position is that the referral court should leave it

for the Arbitral Tribunal to decide whether the non-signatory party is indeed

a party to the arbitration agreement on the basis of factual evidence and

application of legal doctrine.

He submitted that the Delhi and Bombay High

Courts have consistently taken a view to refer the parties, including the non-

signatories to arbitration in
DLF Ltd. v. PNB Housing Finance Ltd.

reported in (
2024) SCC OnLine Del 2165, Moneywise Financial Services

(P) Ltd. v. Dilip Jain
reported in (2024) SCC OnLine Del 1896 and

Cardinal Energy and Infra Structure Pvt. Ltd. v. Subramanya

Construction & Development Co. Ltd. reported in (2024) SCC OnLine

Bom 964 by relying on this Court’s decision in
Cox and Kings
(supra).

34. The counsel finally submitted that it is critical to refer even the non-

signatory to arbitration since otherwise there is a risk that the non-signatory

may not appear before the Arbitral Tribunal and disregard its award as

beyond jurisdiction. In any event, the arbitrability of disputes qua the SRG

Group can always be considered by the Arbitral Tribunal

Arbitration Petition No. 19 of 2024 Page 30 of 67

C. SUBMISSIONS ON BEHALF OF THE RESPONDENT (JRS

GROUP)

35. Ms. Anushree Prashit Kapadia the learned counsel appearing on behalf of

the Respondent JRS Group submitted that while the JRS Group has no

objection to the adjudication of disputes with the AMP Group by arbitral

proceedings presided by the Sole arbitrator nominated by the AMP Group,

the SRG Group cannot be a part of the arbitration proceedings as they are

not party to the FAA. It was also submitted that the FAA contained the

definition of “Parties” and the SRG Group is not defined in the FAA. The

AMP Group and JRS Group are family members, whereas, the SRG Group

is not part of the family.

36. The counsel submitted that the various clauses of the FAA indicate that the

FAA binds only the AMP and JRS Groups. Clauses 2.1.4 and 2.1.6

respectively wherein the SRG Group is mentioned do not cast any

obligations on the SRG Group since it merely states that “Parties shall

execute…” & “Parties shall ensure...”. There is also no exchange of

consideration with the SRG Group in the FAA.

37. The counsel submitted that neither the JRS Group nor the chartered

accountant, Mr. Kalpesh Parmar have ever represented the SRG Group,

Arbitration Petition No. 19 of 2024 Page 31 of 67

acted on their behalf or received any authority or power from the SRG

Group. There is no evidence on record or otherwise to the contrary.

38. The counsel submitted that Clause 8.1 of the FAA on “Entire Agreement”

categorically states that the FAA superseded any and all prior oral and

written agreements. Therefore, the case of the AMP Group that SRG Group

was effectively a part of the negotiations and is privy to the transactions is

inconsequential.

39. The counsel finally submitted that the AMP Group and JRS Group have

fulfilled part of their respective obligations under the FAA and are in a

position to fully execute the FAA without the presence or role of the SRG

Group. Clause 8.7 dealing with Partial Validity empowers the severance of

invalid or unenforceable provisions of the FAA.

D. SUBMISSIONS ON BEHALF OF THE RESPONDENT (SRG

GROUP)

40. Mr. Huzefa Ahmadi, the learned senior counsel appearing on behalf of the

Respondent SRG Group submitted that the present petition is merely a

device to embroil strangers into an agreement entered into between two

groups of the same family since the SRG Group is admittedly neither a party

nor signatory or confirming party to the FAA or the alleged arbitration

Arbitration Petition No. 19 of 2024 Page 32 of 67

agreement contained therein. The AMP and JRS Groups who are

signatories thereto are ad idem about the terms of the FAA, including their

mutual intention to refer the disputes arising from it to arbitration. Had the

SRG Group been involved in the negotiations leading to the signing of the

FAA, or participated therein, or expressed its inclination to be bound by the

arbitration agreement, the same would have been recorded in the FAA.

41. The counsel submitted that the fact that the FAA had always been intended

to operate inter se the AMP and JRS Groups is borne from a bare perusal

of the clauses of the FAA itself which only confers rights or fastens

obligations upon the said Groups.

• Recital F specifically records that the AMP and JRS Groups “after mutual

discussions and negotiations have agreed to settle all disputes/issues that

have arisen amongst the parties over last several years …. on the terms

and conditions as mutually agreed to”.

• Clauses 2.1.4 and 2.1.6 read with Schedules 7 and 8 which relate to the exit

of AMP Group from Millenium and the exit of JRS and SRG Groups from

Deegee contain a mere reference to the SRG Group wherein the foremost

words used read as “In connection with the … Exit, the Parties agree…” –

thereby placing the obligation to exit and/or ensure such exit solely upon

the AMP or JRS Groups, as the case may be. None of these clauses indicate

either the consent or agreement of the SRG Group in this regard.

Arbitration Petition No. 19 of 2024 Page 33 of 67

• Further, in Clause 2.1.7, the FAA places an obligation to unconditionally

withdraw all litigations solely on the AMP and JRS Groups.

42. The counsel submitted that the arbitration clause contained in the FAA by

itself makes a reference only to the parties to the FAA inasmuch as it sets

out the negotiation or dispute resolution mechanism or appointment

procedure to be followed by the parties alone, and importantly, the factum

that the AMP and JRS Groups shall continue to perform their respective

obligations under the FAA, subject to the termination of the FAA. At no

point does the arbitration agreement make any reference to the SRG Group

nor does it fasten any obligations to be performed by it.

43. It was further submitted that there is no defined legal relationship between

the SRG Group and the petitioners to justify the application of
Section 7(1)

of the Act, 1996. In other words, there is no ‘arbitration agreement’ between

them either in the form of an arbitration clause in a contract or in the form

of a separate agreement in terms of sub-sections (2) to (5) of
section 7
of

the Act, 1996. In fact, there is no contract at all between them and

consequently, there is no privity of contract between the Petitioners and

SRG Group in any manner whatsoever.

44. It was also submitted that bringing non-signatories within the scope of the

arbitration agreement is an exception and not the rule.
In support of this, the

Arbitration Petition No. 19 of 2024 Page 34 of 67

counsel relied on the decision of this Court in
Cox & Kings
(supra).

Further, it was submitted that a dual test has to be satisfied to compel the

SRG Group to be a party to the present arbitration proceedings i.e., (a) SRG

Group should be shown to have agreed to the underlying contract and (b)

SRG Group should also be shown to have agreed to be bound by the

arbitration agreement. Both the conditions are not satisfied. A vague

awareness of the JRS and AMP Groups being in negotiations or the mere

marking of emails relating thereto to a member of the SRG Group cannot

imply consent. It was submitted that the SRG Group is neither a consensual

or non-consensual participant in the arbitration proceedings arising out of

the FAA nor have any of the aforementioned consensual or non-consensual

theories been invoked by the petitioners. To compel a party to arbitration in

respect of a family arrangement despite the fact that they are not a member

of the family would sound the death knell to the concept of party autonomy

and freedom of contract.

45. The counsel submitted that apart from co-ownership or common

shareholding in Millenium and Deegee, the SRG Group has no business

relationship or dealings or common interest with either of the other groups.

Since the subject-matter in question is with respect to the implementation

of the FAA, there is no doubt that the same can be effectively implemented

without the participation of the SRG Group in the arbitration proceedings.

Arbitration Petition No. 19 of 2024 Page 35 of 67

Without prejudice to the above, the counsel submitted that severing the only

two sub-clauses that merely make a reference to the SRG Group, without

placing any obligation thereupon i.e., Clauses 2.1.4 and 2.1.6 would in no

way impact the implementation of the FAA.

46. It was submitted that the negotiations leading to the signing of the FAA

were initiated at the behest of one Premji Group in the BVC deal that took

place between the Premji Group, the JRS Group and other shareholders.

Surprisingly, despite disputes having arisen regarding a similar exit of the

JRS Group from BVC, neither BVC nor the Premji Group have been roped

in as participants in the FAA. However, the AMP Group, for reasons best

known to itself, has sought participation of the SRG Group on the feeble

pretext of ensuring exits from Millenium and Deegee.

47. The counsel also submitted that the SRG Group was not a party to the

mediation proceedings since vide email dated 20.12.2021, the AMP Group

invoked mediation as per clause 7.1.2 of the FAA only against the JRS

Group for resolving disputes between themselves. It has been admitted in

the same email that the AMP Group had no contact with the SRG Group

regarding any SPAs for Millenium and Deegee or otherwise and the AMP

Group even castigated the JRS Group for pushing pending obligations inter

se the parties on the SRG Group when “the SRG group is not even a party

Arbitration Petition No. 19 of 2024 Page 36 of 67

to the FAA”. The minutes of the 1st mediation meeting dated 19.01.2022

also reflect that the same was not attended by the members or

representatives of the SRG Group. The counsel further submitted that when

the negotiations were resumed for the second time vide email dated

23.05.2022, the SRG Group neither attended nor was represented in the

same.

48. The counsel submitted that the SRG Group at no point of time, appointed,

engaged or authorised, either the JRS Group or Mr. Kalpesh Parmar to

undertake any actions or make any representations on its behalf or bind it

to any agreement that has been entered into by and between the AMP and

JRS Groups either expressly or impliedly. It was submitted that even as per

the petitioners’ own case, the so called joint meeting dated 14.01.2020 that

was arranged by Mr. Kalpesh Parmar was done so by him representing the

JRS Group and “was attended by Mr. Ashit Patel for AMP Group and

Respondent No.9 of the SRG Group”. Therefore, the petitioners cannot blow

hot and cold and allege that Mr. Parmar also attended in the capacity of a

representative of the SRG Group. Further, the JRS Group itself nominated

Mr. Kalpesh Parmar as its representative for mediation vide email dated

26.12.2021 and therefore, it is not proper for the petitioners to contend that

the SRG Group was represented by Mr. Kalpesh Parmar or the JRS Group.

Arbitration Petition No. 19 of 2024 Page 37 of 67

49. The counsel submitted that the Notice invoking arbitration sent by the JRS

Group on 11.12.2023 was not addressed to the SRG Group. Only in the

Reply to the Arbitration Notice issued by the AMP Group on 12.01.2024,

the SRG Group was marked and this is the first instance that the AMP

Group alluded to the SRG Group as a participant in the FAA and that to

after a span of almost 4 years. This, according to him, was clearly an

afterthought.

50. The counsel in the last submitted that, in the facts of the present case, even

the prima facie threshold required to be met to warrant joinder of non-

parties to arbitral proceedings, either by the referral court or by an arbitral

tribunal, has not been met.

E. ANALYSIS

51. Having heard the learned counsel appearing for the parties and having gone

through the materials on record, the only question that falls for our

consideration is whether the SRG Group, being a non-signatory to the FAA,

should also be referred to arbitration along with the AMP and JRS Groups?

i. Scope of jurisdiction of the referral court under
Section 11(6)
of the

Act, 1996

Arbitration Petition No. 19 of 2024 Page 38 of 67

52. A plethora of decisions have deliberated upon the scope of the Court’s

jurisdiction and the role to be played by the referral court in the appointment

of an arbitrator. The position on this question was starkly different prior to

and post the 2015 Amendment to the 1996, Act.

53. A seven-Judge Bench of this Court in SBP & Co. v. Patel Engg. Ltd.

reported in (2005) 8 SCC 618, held that the power under
Section 11
of the

Act, 1996 was not an administrative but a judicial power. Therefore, it was

opined that the Chief Justice or his designate under Section 11(6) had the

right to decide preliminary issues including his own jurisdiction, to

entertain the request, the existence of a valid arbitration agreement, the

existence or otherwise of a live claim, the existence of the condition for the

exercise of his power and on the qualifications of the arbitrator or

arbitrators. The relevant observations are reproduced hereinbelow:

“47. We, therefore, sum up our conclusions as follows:

(i) The power exercised by the Chief Justice of the High
Court or the Chief Justice of India under
Section 11(6)
of the
Act is not an administrative power. It is a judicial power.

xxx xxx xxx

(iv) The Chief Justice or the designated Judge will have the
right to decide the preliminary aspects as indicated in the
earlier part of this judgment. These will be his own
jurisdiction to entertain the request, the existence of a valid
arbitration agreement, the existence or otherwise of a live
claim, the existence of the condition for the exercise of his
power and on the qualifications of the arbitrator or

Arbitration Petition No. 19 of 2024 Page 39 of 67

arbitrators. The Chief Justice or the designated Judge would
be entitled to seek the opinion of an institution in the matter
of nominating an arbitrator qualified in terms of
Section
11(8)
of the Act if the need arises but the order appointing
the arbitrator could only be that of the Chief Justice or the
designated Judge.

xxx xxx xxx

(ix) In a case where an Arbitral Tribunal has been
constituted by the parties without having recourse to
Section
11(6)
of the Act, the Arbitral Tribunal will have the
jurisdiction to decide all matters as contemplated by
Section
of the Act.

xxx xxx xxx

(xii) … The decision in Konkan Rly.
Corpn. Ltd. v. Rani
Construction (P) Ltd.
[(2002) 2 SCC 388] is overruled.

(Emphasis supplied)

54. While further reinforcing the view taken in SBP & Co. (supra), this Court

in
National Insurance Company Limited v. Boghara Polyfab Private Ltd

reported in (2009) 1 SCC 267 identified and segregated the three categories

of preliminary issues that may arise for consideration in an application

under Section 11 as follows:

“22. Where the intervention of the court is sought for
appointment of an Arbitral Tribunal under Section 11, the
duty of the Chief Justice or his designate is defined in SBP &
Co. [(2005) 8 SCC 618] This Court identified and
segregated the preliminary issues that may arise for
consideration in an application under
Section 11
of the Act
into three categories, that is, (i) issues which the Chief
Justice or his designate is bound to decide; (ii) issues which
he can also decide, that is, issues which he may choose to
decide; and (iii) issues which should be left to the Arbitral
Tribunal to decide.

Arbitration Petition No. 19 of 2024 Page 40 of 67

22.1. The issues (first category) which the Chief Justice/his
designate will have to decide are:

(a) Whether the party making the application has
approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether
the party who has applied under
Section 11
of the Act, is a
party to such an agreement.

22.2. The issues (second category) which the Chief
Justice/his designate may choose to decide (or leave them to
the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a dead (long-barred) claim or a live
claim.

(b) Whether the parties have concluded the
contract/transaction by recording satisfaction of their
mutual rights and obligation or by receiving the final
payment without objection.

22.3. The issues (third category) which the Chief Justice/his
designate should leave exclusively to the Arbitral Tribunal
are:

(i) Whether a claim made falls within the arbitration clause
(as for example, a matter which is reserved for final decision
of a departmental authority and excepted or excluded from
arbitration).

(ii) Merits or any claim involved in the arbitration.

(Emphasis supplied)

55. On a closer look at the categories delineated in the aforesaid decision, it can

be seen that the issues in the first category have to be mandatorily decided

by the Chief Justice or his designate under
Section 11
of the Act, 1996. This

included the question whether there is an arbitration agreement and whether

Arbitration Petition No. 19 of 2024 Page 41 of 67

the party that has applied under Section 11 is also a party to such an

agreement.

56. Later, on the suggestion of the 246th Report of the Law Commission of

India, Section 11(6A) was inserted through the 2015 Amendment to the

Act, 1996. The wide jurisdiction afforded to the referral courts by the

decisions in SBP & Co (supra) and
Boghara Polyfab
(supra) was

legislatively overruled by virtue of the non-obstante clause incorporated in

Section 11(6A). Although the 2019 Amendment to the Act, 1996 omitted

Section 11(6A), such an omission was not notified and therefore Section

11(6A) still remains in force and reads thus:

“(6A) The Supreme Court or, as the case may be, the
High Court, while considering any application Under
Sub-section (4) or Sub-section (5) or Sub-section (6),
shall, notwithstanding any judgment, decree or order of
any Court, confine to the examination of the existence of
an arbitration agreement.”
(Emphasis supplied)

57. The crucial question that arose for consideration by this Court in
Duro

Felguera S.A. v. Gangavaram Port Limited
reported in (2017) 9 SCC 729

was the effect of the change introduced by the 2015 Amendment to the Act,

1996 which inserted Section 11(6A). The Court held that all that needs to

be looked into is whether the agreement contained a Clause which provides

for arbitration pertaining to the disputes which have arisen between the

parties to the agreement i.e., the existence of the arbitration agreement,

Arbitration Petition No. 19 of 2024 Page 42 of 67

nothing more, nothing less. The relevant observations are extracted

hereinbelow:

“48[…] From a reading of Section 11(6-A), the intention of
the legislature is crystal clear i.e. the court should and need
only look into one aspect—the existence of an arbitration
agreement. What are the factors for deciding as to whether
there is an arbitration agreement is the next question. The
resolution to that is simple—it needs to be seen if the
agreement contains a clause which provides for arbitration
pertaining to the disputes which have arisen between the
parties to the agreement.

xxx xxx xxx

59. The scope of the power under Section 11(6) of the 1996
Act was considerably wide in view of the decisions in SBP
and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC
618] and Boghara Polyfab [National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009)
1 SCC (Civ) 117] . This position continued till the
amendment brought about in 2015. After the amendment, all
that the courts need to see is whether an arbitration
agreement exists—nothing more, nothing less. The
legislative policy and purpose is essentially to minimise the
Court's intervention at the stage of appointing the arbitrator
and this intention as incorporated in Section 11(6-A) ought
to be respected.

(Emphasis supplied)

58. A two Judge-Bench of this Court in
Garware Wall Ropes Ltd. v. Coastal

Marine Constructions & Engineering Ltd.
reported in (2019) 9 SCC 209

considered the effect of Section 11(6A) which confined the jurisdiction of

the Court to examine the “existence of an arbitration agreement” on an

arbitration agreement contained in an unstamped document or contract. The

Court was of the opinion that its enquiry as to whether a compulsorily

Arbitration Petition No. 19 of 2024 Page 43 of 67

stampable document, which contains the arbitration clause, is duly stamped

or not, is only an enquiry into whether such an arbitration agreement exists

in law and this does not in any manner amount to deciding “preliminary

question(s)” that arise between the parties. However, in deciding so, the

Court maintained that a referral court must confine itself to the question of

existence of the arbitration agreement and observed as thus:

“14. A reading of the Law Commission Report, together with
the Statement of Objects and Reasons, shows that the Law
Commission felt that the judgments in SBP & Co. [SBP &
Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara
Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab
(P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]
required a relook, as a result of which, so far as Section 11
is concerned, the Supreme Court or, as the case may be, the
High Court, while considering any application under
Sections 11(4) to 11(6) is to confine itself to the examination
of the existence of an arbitration agreement and leave all
other preliminary issues to be decided by the
arbitrator. […]”
(Emphasis supplied)

59. Once again, a three-judge bench of this Court in
Vidya Drolia and Ors. v.

Durga Trading Corporation
reported in (2021) 2 SCC 1 held that Sections

8 and 11 respectively must be read as laying down a similar standard on the

scope of the referral court’s powers. It was stated that the questions as

regards the existence and validity being intertwined, an arbitration

agreement does not exist if it is illegal or does not satisfy mandatory legal

requirements. The decision endorsed the application of a prima facie test in

Arbitration Petition No. 19 of 2024 Page 44 of 67

examining the existence and validity of an arbitration agreement both under

Sections 8 and 11. This prima facie examination was not a full review but

a primary first review to weed out manifest and ex-facie non-existent and

invalid arbitration agreements and non-arbitrable disputes. However, it was

clarified that the Court should not get lost in thickets and decide debatable

questions of fact. The relevant extract is reproduced hereinbelow:

“153. Accordingly, we hold that the expression “existence of
an arbitration agreement” in
Section 11
of the Arbitration
Act, would include aspect of validity of an arbitration
agreement, albeit the court at the referral stage would apply
the prima facie test on the basis of principles set out in this
judgment. In cases of debatable and disputable facts, and
good reasonable arguable case, etc., the court would force
the parties to abide by the arbitration agreement as the
Arbitral Tribunal has primary jurisdiction and authority to
decide the disputes including the question of jurisdiction and
non-arbitrability.”
(Emphasis Supplied)

60.
Vidya Drolia
(supra) while speaking in the context of Section 8 also pointed

out that jurisdictional issues like whether certain parties are bound by the

arbitration agreement must be left to the arbitral tribunal since they involve

complicated factual questions and observed as thus:

“239. […] Jurisdictional issues concerning whether certain
parties are bound by a particular arbitration, under group-
company doctrine or good faith, etc., in a multi-party
arbitration raises complicated factual questions, which are
best left for the tribunal to handle.[…]”
(Emphasis supplied)

Arbitration Petition No. 19 of 2024 Page 45 of 67

61. A Constitution Bench of this Court in In Re: Interplay Between Arbitration

Agreements under
Arbitration and Conciliation Act, 1996
and
Stamp Act,
reported in (2024) 6 SCC 1, stated that an arbitration agreement

contained in an unstamped or insufficiently stamped contract would not be

non-existent in law as stated in
Garware Wall Ropes
(supra).

It also

clarified the position taken in
Vidya Drolia
(supra) and stated that the

parameters for judicial review under Sections 8 and 11 respectively were

different. The scope of examination under Section 11(6) should be confined

to the “existence of the arbitration agreement” under
Section 7
of the Act,

1996. Similarly, the “validity of an arbitration agreement” must be

restricted to the requirement of formal validity such as the requirement that

the agreement be in writing. Substantive objections pertaining to existence

and validity on the basis of evidence must therefore be left to the arbitral

tribunal. Moreover, it was stated that the expression “examination” under

Section 11 does not connote or imply a laborious or contested inquiry. On

the other hand, Section 16 provides that the arbitral tribunal can “rule” on

its jurisdiction, including the existence and validity of an arbitration

agreement. It was also stated that any prima facie opinion rendered by the

Court under Section 11 need not bind the arbitral tribunal. The relevant

observations are extracted hereinbelow:

“164. The 2015 Amendment Act has laid down different
parameters for judicial review under Section 8 and Section

11. Where Section 8 requires the Referral Court to look into

Arbitration Petition No. 19 of 2024 Page 46 of 67

the prima facie existence of a valid arbitration agreement,
Section 11 confines the Court's jurisdiction to the
examination of the existence of an arbitration agreement.
Although the object and purpose behind both Sections 8 and
11 is to compel parties to abide by their contractual
understanding, the scope of power of the Referral Courts
under the said provisions is intended to be different. The
same is also evident from the fact that
Section 37
of the
Arbitration Act allows an appeal from the order of an
Arbitral Tribunal refusing to refer the parties to arbitration
under Section 8, but not from Section 11. Thus, the 2015
Amendment Act has legislatively overruled the dictum
of Patel Engg. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC
618] where it was held that Section 8 and Section 11 are
complementary in nature. Accordingly, the two provisions
cannot be read as laying down a similar standard.

165. The legislature confined the scope of reference under
Section 11(6-A) to the examination of the existence of an
arbitration agreement. The use of the term “examination” in
itself connotes that the scope of the power is limited to a
prima facie determination. Since the Arbitration Act is a self-

contained code, the requirement of “existence” of an
arbitration agreement draws effect from
Section 7
of the
Arbitration Act.
In
Duro Felguera [Duro Felguera,
S.A. v. Gangavaram Port Ltd.
, (2017) 9 SCC 729 : (2017) 4
SCC (Civ) 764] , this Court held that the Referral Courts
only need to consider one aspect to determine the existence
of an arbitration agreement — whether the underlying
contract contains an arbitration agreement which provides
for arbitration pertaining to the disputes which have arisen
between the parties to the agreement. Therefore, the scope of
examination under Section 11(6-A) should be confined to the
existence of an arbitration agreement on the basis of Section

7. Similarly, the validity of an arbitration agreement, in view
of Section 7, should be restricted to the requirement of
formal validity such as the requirement that the agreement
be in writing. This interpretation also gives true effect to the
doctrine of competence-competence by leaving the issue of
substantive existence and validity of an arbitration
agreement to be decided by Arbitral Tribunal under Section

16. We accordingly clarify the position of law
laid down
in

Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.
,

Arbitration Petition No. 19 of 2024 Page 47 of 67

(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] in the context of
Section 8 and
Section 11
of the Arbitration Act.

166. The burden of proving the existence of arbitration
agreement generally lies on the party seeking to rely on such
agreement. In jurisdictions such as India, which accept the
doctrine of competence-competence, only prima facie proof
of the existence of an arbitration agreement must be adduced
before the Referral Court. The Referral Court is not the
appropriate forum to conduct a mini-trial by allowing the
parties to adduce the evidence in regard to the existence or
validity of an arbitration agreement. The determination of
the existence and validity of an arbitration agreement on the
basis of evidence ought to be left to the Arbitral Tribunal.
This position of law can also be gauged from the plain
language of the statute.

167. Section 11(6-A) uses the expression “examination of the
existence of an arbitration agreement”. The purport of using
the word “examination” connotes that the legislature
intends that the Referral Court has to inspect or scrutinise
the dealings between the parties for the existence of an
arbitration agreement. Moreover, the expression
“examination” does not connote or imply a laborious or
contested inquiry. [ P. Ramanatha Aiyar, The Law
Lexicon (2nd Edn., 1997) 666.] On the other hand, Section
16 provides that the Arbitral Tribunal can “rule” on its
jurisdiction, including the existence and validity of an
arbitration agreement. A “ruling” connotes adjudication of
disputes after admitting evidence from the parties.
Therefore, it is evident that the Referral Court is only
required to examine the existence of arbitration agreements,
whereas the Arbitral Tribunal ought to rule on its
jurisdiction, including the issues pertaining to the existence
and validity of an arbitration agreement.[…]

xxx xxx xxx

169. When the Referral Court renders a prima facie opinion,
neither the Arbitral Tribunal, nor the Court enforcing the
arbitral award will be bound by such a prima facie view. If
a prima facie view as to the existence of an arbitration
agreement is taken by the Referral Court, it still allows the

Arbitration Petition No. 19 of 2024 Page 48 of 67

Arbitral Tribunal to examine the issue in depth. Such a legal
approach will help the Referral Court in weeding out prima
facie non-existent arbitration agreements. It will also protect
the jurisdictional competence of the Arbitral Tribunals to
decide on issues pertaining to the existence and validity of
an arbitration agreement.”
(Emphasis supplied)

62. This very Bench in SBI General Insurance Co. Ltd. v. Krish Spinning

reported in (2024) SCC OnLine SC 1754 dealt with the scope and standard

of judicial scrutiny in an application made under
Section 11(6)
of the Act,

1996 specifically when a plea of “accord and satisfaction” is taken by the

defendant. It was observed that in a scenario where the Courts delve into

the domain of the arbitral tribunal at the Section 11 stage and reject the

application, there is a risk of leaving the claimant forum-less for the

adjudication of its claims. It was stated that a detailed examination at this

stage would also be counterproductive to the objective of expediency in

deciding a Section 11 application and simplification of pleadings. It was

also stated that even if ex-facie frivolity is made out by the referral court,

the arbitral tribunal has the benefit of extensive pleadings and evidentiary

material and therefore, it would be incorrect to doubt that the arbitral

tribunal would not be able to arrive at a similar conclusion. The relevant

observations are reproduced hereinbelow:

“123. The power available to the referral courts has to be
construed in the light of the fact that no right to appeal is
available against any order passed by the referral court
under Section 11 for either appointing or refusing to appoint

Arbitration Petition No. 19 of 2024 Page 49 of 67

an arbitrator. Thus, by delving into the domain of the arbitral
tribunal at the nascent stage of Section 11, the referral courts
also run the risk of leaving the claimant in a situation
wherein it does not have any forum to approach for the
adjudication of its claims, if it Section 11 application is
rejected.

124. Section 11 also envisages a time-bound and expeditious
disposal of the application for appointment of arbitrator.

One of the reasons for this is also the fact that unlike Section
8, once an application under Section 11 is filed, arbitration
cannot commence until the arbitral tribunal is constituted by
the referral court. This Court, on various occasions, has
given directions to the High Courts for expeditious disposal
of pending Section 11 applications. It has also directed the
litigating parties to refrain from filing bulky pleadings in
matters pertaining to Section 11. Seen thus, if the referral
courts go into the details of issues pertaining to “accord and
satisfaction” and the like, then it would become rather
difficult to achieve the objective of expediency and
simplification of pleadings.

125. We are also of the view that ex-facie frivolity and
dishonesty in litigation is an aspect which the arbitral
tribunal is equally, if not more, capable to decide upon the
appreciation of the evidence adduced by the parties. We say
so because the arbitral tribunal has the benefit of going
through all the relevant evidence and pleadings in much
more detail than the referral court. If the referral court is
able to see the frivolity in the litigation on the basis of bare
minimum pleadings, then it would be incorrect to doubt that
the arbitral tribunal would not be able to arrive at the same
inference, most likely in the first few hearings itself, with the
benefit of extensive pleadings and evidentiary material.”
(Emphasis supplied)

63. The recent Constitution Bench decision of this Court in
Cox and Kings

Limited v. SAP India Private Limited and Another
reported in (2024) 4

SCC 1, specifically dealt with the question of impleading a non-signatory

Arbitration Petition No. 19 of 2024 Page 50 of 67

as a party in the arbitration proceedings and the corresponding scope of

enquiry at the referral stage. It was held therein that Section 16 is an

inclusive provision which comprehends all preliminary issues touching

upon the jurisdiction of the arbitral tribunal and the issue of determining

parties to an arbitration agreement goes to the very root of the jurisdictional

competence of the arbitral tribunal. The relevant observations are

reproduced hereinbelow:

163.
Section 16
of the Arbitration Act enshrines the principle
of competence-competence in Indian arbitration law. The
provision empowers the Arbitral Tribunal to rule on its own
jurisdiction, including any ruling on any objections with
respect to the existence or validity of arbitration agreement.

Section 16 is an inclusive provision which comprehends all
preliminary issues touching upon the jurisdiction of the
Arbitral Tribunal. [
Uttarakhand Purv Sainik Kalyan Nigam
Ltd. v. Northern Coal Field Ltd.
, (2020) 2 SCC 455 : (2020)
1 SCC (Civ) 570] The doctrine of competence-competence is
intended to minimise judicial intervention at the threshold
stage. The issue of determining parties to an arbitration
agreement goes to the very root of the jurisdictional
competence of the Arbitral Tribunal.

xxx xxx xxx

169. In case of joinder of non-signatory parties to an
arbitration agreement, the following two scenarios will
prominently emerge : first, where a signatory party to an
arbitration agreement seeks joinder of a non-signatory party
to the arbitration agreement; and second, where a non-
signatory party itself seeks invocation of an arbitration
agreement. In both the scenarios, the referral court will be
required to prima facie rule on the existence of the
arbitration agreement and whether the non-signatory is a
veritable party to the arbitration agreement. In view of the
complexity of such a determination, the referral court should
leave it for the Arbitral Tribunal to decide whether the non-
signatory party is indeed a party to the arbitration agreement

Arbitration Petition No. 19 of 2024 Page 51 of 67

on the basis of the factual evidence and application of legal
doctrine. The Tribunal can delve into the factual,
circumstantial, and legal aspects of the matter to decide
whether its jurisdiction extends to the non-signatory party. In
the process, the Tribunal should comply with the
requirements of principles of natural justice such as giving
opportunity to the non-signatory to raise objections with
regard to the jurisdiction of the Arbitral Tribunal. This
interpretation also gives true effect to the doctrine of
competence-competence by leaving the issue of
determination of true parties to an arbitration agreement to
be decided by the Arbitral Tribunal under Section 16.

170. In view of the discussion above, we arrive at the
following conclusions:

xxx xxx xxx

(170.12) At the referral stage, the referral court should leave
it for the Arbitral Tribunal to decide whether the non-
signatory is bound by the arbitration agreement […]”
(Emphasis supplied)

64. Therefore, on the pivotal issue whether the non-signatories can be referred

to arbitration, this Court took the view that the referral court is required to

prima facie rule on the existence of the arbitration agreement and whether

the non-signatory party is a veritable party to the arbitration agreement.

However, recognising the complexity of such a determination, the arbitral

tribunal was considered the proper forum since it can decide whether the

non-signatory is a party to the arbitration agreement on the basis of factual

evidence and application of legal doctrine. In this process, the non-

signatory must also be given an opportunity to raise objections regarding

Arbitration Petition No. 19 of 2024 Page 52 of 67

the jurisdiction of the arbitral tribunal in accordance with the principles of

natural justice.

65. The position of law that emerges from the aforesaid discussion can be

summarized as follows;

• SBP & Co. (supra) expanded the scope of the Court’s power under

Section 11 while empowering the referral courts to decide several

preliminary issues.
Boghara Polyfab
(supra) went to the extent of

identifying three categories of preliminary issues that may arise for

consideration in an application under Section 11. Of these, in the first

category which had to be mandatorily decided by the referral Court, the

question whether there was an arbitration agreement and whether the

party who has applied under
Section 11
of the Act, 1996 is a party to such

an agreement, was also included.

• The insertion of Section 11(6A) through the 2015 Amendment to the Act,

1996 stipulated that the Courts under Section 11 shall confine their

examination to the ‘existence’ of an arbitration agreement. It legislatively

overruled the decisions in SBP & Co. (supra) and
Boghara Polyfab

(supra) by virtue of its non-obstante clause.

•
Duro Felguera
(supra), in clear terms, clarified the effect of the change

brought in by Section 11(6A) and stated that all that the Courts need to

Arbitration Petition No. 19 of 2024 Page 53 of 67

see is whether an arbitration agreement exists - nothing more, nothing

less.

•
Vidya Drolia
(supra) endorsed the prima facie test in examining the

existence and validity of an arbitration agreement both under Sections 8

and 11 respectively. However, it was clarified that in cases of debatable

and disputable facts and reasonably good arguable case, etc. the Court

may refer the parties to arbitration since the arbitral tribunal has the

authority to decide disputes including the question of jurisdiction. It was

further stated that jurisdictional issues concerning whether certain parties

are bound by a particular arbitration under the group-company doctrine

etc. in a multi-party arbitration raise complicated questions of fact which

are best left to the tribunal to decide.

• In In Re: Interplay (supra) the position taken in
Vidya Drolia
(supra)

was clarified to state that the scope of examination under Section 11(6)

should be confined to the “existence of the arbitration agreement” under

Section 7
of the Act, 1996 and the “validity of an arbitration agreement”

must be restricted to the requirement of formal validity such as the

requirement that the agreement be in writing. Therefore, substantive

objections pertaining to existence and validity on the basis of evidence

must be left to the arbitral tribunal since it can “rule” on its own

jurisdiction.

Arbitration Petition No. 19 of 2024 Page 54 of 67

• Krish Spinning (supra) cautioned that the Courts delving into the

domain of the arbitral tribunal at the Section 11 stage run the risk of

leaving the claimant remediless if the Section 11 application is rejected.

Further, it was stated that a detailed examination by the courts at the

Section 11 stage would be counterproductive to the objective of

expeditious disposal of Section 11 application and simplification of

pleadings at that stage.

•
Cox and Kings
(supra) specifically dealt with the scope of inquiry under

Section 11 when it comes to impleading the non-signatories in the

arbitration proceedings. While saying that the referral court would be

required to prima facie rule on the existence of the arbitration agreement

and whether the non-signatory party is a veritable party to the arbitration

agreement, it also said that in view of the complexity in such a

determination, the arbitral tribunal would be the proper forum. It was

further stated that the issue of determining parties to an arbitration

agreement goes to the very root of the jurisdictional competence of the

arbitral tribunal and can be decided under its jurisdiction under Section

16.

ii. Whether on a prima facie view, the SRG Group being a non-

signatory to the FAA, can be referred to arbitration?

Arbitration Petition No. 19 of 2024 Page 55 of 67

66. It is well settled that an arbitration agreement, in order to qualify as a valid

agreement, has to satisfy the requirements stipulated under
Section 7
of the

Act, 1996 along with the principles of law under the
Indian Contract Act,
. Having regard to the submissions of both the Respondent Groups i.e.,

JRS and SRG, it can be said that they have raised manifold objections to

the present petition, however, none of those objections question or deny the

existence of the arbitration agreement under which the arbitration has been

invoked by the Petitioner AMP Group. In fact, the JRS Group has no

objection to resolve the disputes with the AMP Group by way of arbitration.

Their primary objection is only that the SRG Group cannot be a part of the

arbitration proceedings. Therefore, the requirement of prima facie existence

of an arbitration agreement, as stated under
Section 11
of the Act, 1996 is

satisfied.

67. However, the core issue that falls for our consideration is whether the SRG

Group, being a non-signatory to the FAA can also be referred to arbitration

and whether they are “veritable” parties to the arbitration agreement.

68. This Court in
Cox and Kings
(supra) held that the definition of “parties”

under
Section 2(1)(h)
read with
Section 7
of the Act, 1996 includes both

the signatory as well as non-signatory parties. Persons or entities who have

not formally signed the arbitration agreement or the underlying contract

containing the arbitration agreement may also intend to be bound by the

Arbitration Petition No. 19 of 2024 Page 56 of 67

terms of the agreement. Further, the requirement of a written agreement

under
Section 7
of the Act, 1996 does not exclude the possibility of binding

non-signatory parties if there is a defined legal relationship between the

signatory and non-signatory parties. Therefore, the issue as to who is a

“party” to an arbitration agreement is primarily an issue of consent. Actions

or conduct could be an indicator of the consent of a party to be bound by

the arbitration agreement. This aspect is also evident from a reading of

Section 7(4)(b) which emphasises on the manifestation of the consent of

persons or entities through actions of exchanging documents.

The relevant

observations made in
Cox and Kings
(supra) are extracted hereinbelow:

“83. Reading
Section 7
of the Arbitration Act in view of the
above discussion gives rise to the following conclusions
: first, arbitration agreements arise out of a legal
relationship between or among persons or entities which
may be contractual or otherwise; second, in situations where
the legal relationship is contractual in nature, the nature of
relationship can be determined on the basis of general
contract law principles; third, it is not necessary for the
persons or entities to be signatories to the arbitration
agreement to be bound by it; fourth, in case of non-signatory
parties, the important determination for the Courts is
whether the persons or entities intended or consented to be
bound by the arbitration agreement or the underlying
contract containing the arbitration agreement through their
acts or conduct; fifth, the requirement of a written
arbitration agreement has to be adhered to strictly, but the
form in which such agreement is recorded is
irrelevant; sixth, the requirement of a written arbitration
agreement does not exclude the possibility of binding non-
signatory parties if there is a defined legal relationship
between the signatory and non-signatory parties;
and seventh, once the validity of an arbitration agreement is

Arbitration Petition No. 19 of 2024 Page 57 of 67

established, the Court or tribunal can determine the issue of
which parties are bound by such agreement.”

84. It is presumed that the formal signatories to an
arbitration agreement are parties who will be bound by it.

However, in exceptional cases persons or entities who have
not signed or formally assented to a written arbitration
agreement or the underlying contract containing the
arbitration agreement may be held to be bound by such
agreement. As mentioned in the preceding paragraphs, the
doctrine of privity limits the imposition of rights and
liabilities on third parties to a contract. Generally, only the
parties to an arbitration agreement can be subject to the full
effects of the agreement in terms of the reliefs and remedies
because they consented to be bound by the arbitration
agreement. Therefore, the decisive question before the
Courts or tribunals is whether a non-signatory consented to
be bound by the arbitration agreement. To determine
whether a non-signatory is bound by an arbitration
agreement, the Courts and tribunals apply typical principles
of contract law and corporate law. The legal doctrines
provide a framework for evaluating the specific contractual
language and the factual settings to determine the intentions
of the parties to be bound by the arbitration agreement. [
Gary Born, International Arbitration Law and Practice, (3rd
Edn., 2021) at p. 1531.]
xxx xxx xxx

170. In view of the discussion above, we arrive at the
following conclusions:

170.1. The definition of “parties” under
Section 2(1)(h)
read
with
Section 7
of the Arbitration Act includes both the
signatory as well as non-signatory parties;

170.2. Conduct of the non-signatory parties could be an
indicator of their consent to be bound by the arbitration
agreement;

170.3. The requirement of a written arbitration agreement
under Section 7 does not exclude the possibility of binding
non-signatory parties;[…]”
(Emphasis supplied)

Arbitration Petition No. 19 of 2024 Page 58 of 67

69. The fact that a non-signatory did not put pen to paper may be an indicator

of its intention to not assume any rights, responsibilities or obligations

under the arbitration agreement. However, the courts and tribunals should

not adopt a conservative approach to exclude all persons or entities who

intended to be bound by the underlying contract containing the arbitration

agreement through their conduct and their relationship with the signatory

parties. The mutual intent of the parties, relationship of a non-signatory with

a signatory, commonality of the subject matter, composite nature of the

transactions and performance of the contract are all factors that signify the

intention of the non-signatory to be bound by the arbitration agreement.

70. An important factor to be considered by the Courts and Tribunals is the

participation of the non-signatory in the performance of the underlying

contract.
In this regard, it was observed in
Cox and Kings
(supra) as

follows:

“123. […] The intention of the parties to be bound by an
arbitration agreement can be gauged from the circumstances
that surround the participation of the non-signatory party in
the negotiation, performance, and termination of the
underlying contract containing such agreement.
The UNIDROIT Principle of International Commercial
Contract, 2016 [UNIDROIT Principles of International
Commercial Contracts, 2016,
Article 4.3.]
provides that the
subjective intention of the parties could be ascertained by
having regard to the following circumstances:

(a) preliminary negotiations between the parties;

Arbitration Petition No. 19 of 2024 Page 59 of 67

(b) practices which the parties have established between
themselves;

(c) the conduct of the parties subsequent to the conclusion of
the contract;

(d) the nature and purpose of the contract;

(e) the meaning commonly given to terms and expressions in
the trade concerned; and

(f) usages.

xxx xxx xxx

126. Evaluating the involvement of the non-signatory party
in the negotiation, performance, or termination of a contract
is an important factor for a number of reasons. First, by
being actively involved in the performance of a contract, a
non-signatory may create an appearance that it is a veritable
party to the contract containing the arbitration agreement;

second, the conduct of the non-signatory may be in harmony
with the conduct of the other members of the group, leading
the other party to legitimately believe that the non-signatory
was a veritable party to the contract; and third, the other
party has legitimate reasons to rely on the appearance
created by the non-signatory party so as to bind it to the
arbitration agreement.

xxx xxx xxx

127. […] The nature or standard of involvement of the non-
signatory in the performance of the contract should be such
that the non-signatory has actively assumed obligations or
performance upon itself under the contract. In other words,
the test is to determine whether the non-signatory has a
positive, direct, and substantial involvement in the
negotiation, performance, or termination of the contract.
Mere incidental involvement in the negotiation or
performance of the contract is not sufficient to infer the
consent of the non-signatory to be bound by the underlying
contract or its arbitration agreement. The burden is on the
party seeking joinder of the non-signatory to the arbitration
agreement to prove a conscious and deliberate conduct of
involvement of the non-signatory based on objective
evidence.”
(Emphasis supplied)

Arbitration Petition No. 19 of 2024 Page 60 of 67

71. It is evident that the intention of the parties to be bound by an arbitration

agreement can be gauged from the circumstances that surround the

participation of the non-signatory party in the negotiation, performance, and

termination of the underlying contract containing such an agreement.

Further, when the conduct of the non-signatory is in harmony with the

conduct of the others, it might lead the other party or parties to legitimately

believe that the non-signatory was a veritable party to the contract

containing the arbitration agreement. However, in order to infer consent of

the non-signatory party, their involvement in the negotiation or

performance of the contract must be positive, direct and substantial and not

be merely incidental. Thus, the conduct of the non-signatory party along

with the other attending circumstances may lead the referral court to draw

a legitimate inference that it is a veritable party to the arbitration agreement.

72. Of the several entities pertaining to which settlement is contemplated under

the FAA dated 28.02.2020 executed between the AMP Group and JRS

Group, clauses 2.1.4 and 2.1.6 relate to Millenium and Deegee which are

Respondent Nos. 7 and 8 companies respectively. It is an undisputed fact

that Respondent Nos. 7 and 8 companies are themselves a part of the SRG

Group. Therefore, prima facie without the joinder of the SRG Group, which

includes Millenium and Deegee, there may not be a complete and effective

Arbitration Petition No. 19 of 2024 Page 61 of 67

resolution of the disputes arising out of the FAA between the AMP and JRS

Groups.

73. Clause 2.1.4 read with Schedule 7 of the FAA prima facie indicates that the

petitioners i.e., the AMP Group has to exit from the Respondent No.7

company i.e. Millenium where they hold Class A equity shares amounting

to 36%. According to the procedure contemplated therein, during Phase 1

of the Millenium exit, the SRG Group (which already holds 40% shares in

Millenium) is supposed to additionally purchase approx. 11% of the shares

in Millenium held by the AMP Group. It is stated therein that the JRS Group

would provide the necessary funding to SRG Group to purchase the

aforementioned shares. In Phase 2, Millenium would buy back the balance

shares of the AMP Group i.e., approx. 25% from the funds to be received

from Respondent No. 8 company i.e. Deegee.

74. Clause 2.1.6 read with Schedule 8 prima facie indicates that the JRS Group

and SRG Group would completely exit from the Respondent No. 8

Company i.e., Deegee. The proceeds received by the AMP Group from the

sale of its shares in Millenium as per Phase 1 of the Millenium exit would

be brought into Deegee by the AMP Group. AMP Group is also required to

bring further funds into Deegee to pay off the entire loan provided by

Millenium to Deegee along with interest at the rate of 14.5% compounded

annually. Simultaneously with the repayment of loans to Millenium as

Arbitration Petition No. 19 of 2024 Page 62 of 67

aforesaid, Deegee is also required to pay off the entire loan provided by the

JRS Group and SRG Group with interest at the rate of 14.5% compounded

annually. Subsequently, the shares of Deegee held by the JRS Group and

SRG Group would be transferred completely to the AMP Group.

75. In short, while the AMP Group is supposed to exit from Millenium and

acquire shares in Deegee, the JRS and SRG Groups are supposed to exit

from Deegee and, the SRG Group would acquire shares in Millenium. It is

also provided that agreements are to be executed with or by the SRG Group

to record and finalize the understanding with respect to the exit of AMP

Group from Millenium and the exit of JRS and SRG Groups from Deegee.

Recognising the interdependent nature of the transactions contemplated

with respect to Millenium and Deegee, clause 2.1.4(a) also states that the

exit of Millenium and Deegee should be endeavoured to be undertaken

simultaneously on the same day.

76. Further Clause 2.1.7 requires the AMP Group to irrevocably and

unconditionally withdraw all litigations including CP/383/2017 filed in

connection with Deegee by the AMP Group before the NCLT at Mumbai

wherein Respondent No.9 of the SRG Group is one of the respondents.

77. All that has been stated aforesaid gives an impression, though prima facie,

that the SRG Group may be connected to the FAA and forms part of the

Arbitration Petition No. 19 of 2024 Page 63 of 67

settlement contemplated therein. However, this aspect should be looked

into more closely by the Arbitral Tribunal.

78. Moreover, on the question whether the non-signatory party i.e., the SRG

Group intended or consented to be bound by the arbitration agreement or

the underlying contract containing the arbitration agreement through their

acts or conduct, elaborate submissions have been made on behalf of all three

groups, by placing reliance on the terms of the agreement, several email

exchanges etc. On bare perusal of the email exchanges produced by the

petitioner, it appears prima facie that several contested questions of fact,

including but not limited to those hereinbelow, need to be first resolved:

• Whether Mr. Kalpesh Parmar or the JRS Group can be said to have

represented the interests of the SRG Group during the negotiations

leading up to the FAA, its implementation and during the mediation

process;

• Whether the marking of several emails to the Respondent No.9 of the

SRG Group and the absence of any protest on his part can imply consent

of the SRG Group to be bound by the underlying contract and/or the

arbitration agreement;

• Whether the documents required for the valuation and due diligence of

Millenium and Deegee could have been shared by an employee of

Deegee without the knowledge or consent of the SRG Group; and

Arbitration Petition No. 19 of 2024 Page 64 of 67

• Whether the demand of an additional Rs. 25 crore made by the SRG

Group through the JRS Group as a condition for exit from Deegee

indicates their intention to be bound by the underlying contract and/or

the arbitration agreement?

79. A detailed examination of numerous disputed questions of fact are

imperative in deciding whether the SRG Group participated in the

negotiation and performance of the underlying contract and can be bound

by the arbitration agreement. At the cost of repetition, we may state that

under our limited jurisdiction afforded under
Section 11(6)
of the Act, 1996

we should not conduct a mini trial and delve into contested or disputed

questions of fact. This has been categorically
laid down in
several decisions

of this Court including
Vidya Drolia
(supra) and Krish Spinning (supra).

Further, it is also the case of the SRG Group that a dual test needs to be

satisfied before it is compelled to be a party to the present arbitration

proceedings i.e., (a) SRG Group should be shown to have agreed to the

underlying contract and (b) SRG Group should also be shown to have

agreed to be bound by the arbitration agreement. We are of the considered

view that the same requires a much more detailed examination of the

evidence that may be adduced by the parties which can only be gone into

by the Arbitral Tribunal.

Arbitration Petition No. 19 of 2024 Page 65 of 67

80. Therefore, considering the complexity involved in the determination of the

question whether the SRG Group is a veritable party to the arbitration

agreement or not, we are of the view that it would be appropriate for the

arbitral tribunal to take a call on the question after taking into consideration

the evidence that may be adduced by the parties before it and the application

of the legal doctrine as elaborated in the decision in
Cox and Kings
(supra).

81. We also prima facie find force in the contention of the petitioner AMP

Group that the nomenclature of the agreement is not determinative of its

character as held by this Court in
Sasan Power Ltd.
(supra). Therefore, the

fact that the underlying contract is called the “Family Arrangement

Agreement” by itself may not preclude the impleadment of the SRG Group

in arbitration.

82. Once the arbitral tribunal is constituted, it shall be open for the respondents

to raise all the available objections in law, and it is only after (and if) the

preliminary objections are rejected that the tribunal shall proceed to

adjudicate the claims of the Petitioners.

F. CONCLUSION

83. In view of the aforesaid, the present petition is allowed. We appoint Mr.

Akil Kureshi (Former Chief Justice, High Court of Rajasthan) to act as the

Arbitration Petition No. 19 of 2024 Page 66 of 67

sole arbitrator. The fees of the arbitrator including other modalities shall be

fixed in consultation with the parties.

84. It is made clear that all the rights and contentions of the parties are left open

for adjudication by the learned arbitrator.

85. Pending application(s), if any, shall stand disposed of.

…………………………………….CJI.

(Dr. Dhananjaya Y. Chandrachud)

………………………………………J.
(J.B. Pardiwala)

………………………………………J.
(Manoj Misra)
New Delhi;

September 20, 2024.

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