Arbitration and Conciliation Act, 1996 – ss.35, 42A – Oral family settlement entered into between ‘PG’ and ‘KG’ was reduced in a Memorandum of Understanding/Family Settlement Deed which was not signed by son of ‘KG’ (‘RG’) – Disputes arose, proceedings u/s.11(6) were filed for appointment of a sole arbitrator – ‘RG’, a non-signatory to the agreement filed application seeking intervention – Arbitrator appointed – Eventually, application for intervention was also allowed and ‘RG’ and other non-signatory intervenors were permitted to be present, either personally or through counsel during the arbitration – Challenge to:
Held: The permission granted to ‘RG’, a non-signatory to remain present in all proceedings before the sole arbitrator is without jurisdiction and beyond the scope of the Act – When the arbitration proceedings can take place only between parties to an arbitration agreement and s.35 does not make the arbitral award to be passed binding on non-signatories to such agreement, there is no legal right conferred by the Act that would enable a non-party to the agreement to remain present in arbitration proceedings between signatories to the agreement – The parties to the agreement being bound by the terms of the agreement and the sole arbitrator being required to resolve the disputes between parties to the agreement, a non-signatory to the agreement would be a stranger to such arbitration proceedings – A stranger cannot be permitted to remain present in the arbitration proceedings especially when the award to be passed would not be binding on such stranger – The arbitrator, the arbitral institution and the parties to the arbitration agreement have to maintain confidentiality of all arbitral proceedings – Permitting a stranger to the arbitration proceedings to remain present and observe the said proceedings would result in breach of the provisions of s.42A – The remedy, if any, to a party who is not a signatory to the agreement is available u/s.36 of the Act if such award is sought to be enforced against him. [Paras 13, 14] Arbitration and Conciliation Act, 1996 – ss.11(6), 5 – After appointment of an arbitrator u/s.11(6), whether it is permissible for the Court in such disposed of proceedings to issue any further ancillary directions concerning the arbitration proceedings that have commenced pursuant to appointment of the arbitrator:
Held: No – The sole arbitrator having been appointed u/s.11(6) on 22.03.2024, nothing further was required to be done in exercise of jurisdiction u/s.11(6) thereafter – The prayer made by ‘RG’ and other intervenors to permit them to remain present in the arbitration proceedings before the sole arbitrator was not liable to be entertained as such request went beyond the scope of s.11(6) – s.151, CPC could not have been invoked in this regard – The Court had become functus officio after the sole arbitrator was appointed and the proceedings u/s.11(6) had been disposed of – s.5 also precluded the Court from entertaining such request which does not find place in Part-I of the Act – Moreover, the impugned direction runs counter to s.42A – Applications filed by ‘RG’ and other non-signatory companies in the disposed of proceedings were misconceived – The attempt on their behalf to re-open the proceedings amounted to an abuse of the process of law – It was an error to entertain the same on merits – Order passed on the various interim applications, set aside – Costs imposed on respondents – Code of Civil Procedure, 1908 – s.151. [Paras 23, 24]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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