Delhi High Court: An appeal was filed by the appellant questioning the jurisdiction of an Arbitral Tribunal to join and implead non-signatories to an arbitration agreement post reference of disputes by a court based on the absence of a specific conferral of power as discernible from the provisions of the Arbitration and Conciliation. Yashwant Varma, J., sets aside the impugned order dated 23-12-2021 passed by the Sole Arbitrator and held that the Act confers no authority upon an Arbitral Tribunal to wield powers akin to Order I Rule 10 of the CPC as specifically conferred on national courts.
Counsel for the appellant contended that an Arbitral Tribunal does not stand vested with the authority or jurisdiction to implead parties who may have neither been signatories to an arbitration agreement nor parties to proceedings before a referring court. The ‘alter ego’ or ‘group of companies’ doctrines that have been occasionally invoked to join third parties can be resorted to only by Courts. The Arbitral Tribunal is bound by the order of a referring Court, which must be accepted as defining the contours of its jurisdiction including the parties between whom proceedings alone may be drawn. According to the appellants, since arbitration is founded upon ‘party consent’ it would be wholly incorrect to recognise a power inhering in the Arbitral Tribunal to join non-signatories.
Counsel for respondents submitted that the provisions of the Act must be interpreted to enable the Arbitral Tribunal to effectively and conclusively resolve all disputes. The provisions of the Act when interpreted bearing in mind the scheme of the statute and its resolve to construct arbitration as an effective alternate dispute resolution mechanism would lead one to the irresistible conclusion that the Arbitral Tribunal must be recognised to have all the powers that may otherwise inhere in and be resorted to by courts in general. They thus recommend that the Court should recognise the power to implead as inherently vesting in the Arbitral Tribunal.
The Court noted that the Arbitral Tribunal owes its origin principally to well-recognised and identifiable sources. The principal source would be the agreement in terms of which parties may have resolved all disputes being referred to an Arbitral Tribunal and thus choose a forum falling outside the circuit of national courts and the ordinary hierarchy of judicial authorities. The other would-be rules are framed by a body where the agreement contemplates institutional arbitration. Finally, would be the statutory laws framed by countries that are intended to govern and regulate Arbitral Tribunal. The agreement, institutional rules or national statutes would thus constitute the code or the body of laws specifying the powers that may be available to be exercised by the Arbitral Tribunal.
The Court further noted that what needs to be emphasized is that an Arbitral Tribunal cannot arrogate to itself powers that are neither conferred by the statute, or the rules which govern the arbitration, nor can it take recourse to inherent powers, which as has been found hereinabove, are acknowledged to inhere in courts and judicial authorities only. The Arbitral Tribunal cannot, therefore, expropriate for itself, powers that are vested solely in judicial institutions. It remains bound by the provisions of the statutes which prevail and which in this case undisputedly is the Act. In the absence of a power of impleadment having been conferred upon the Arbitral Tribunal in terms thereof, it would have no authority or jurisdiction to join or implead parties to the proceedings.
The Court observed that the Arbitration Act incorporates no provision which could be even remotely considered as being liable to be read as being the repository of the power of the Arbitral Tribunal to implead. If the Arbitral Tribunal were recognised to have the authority to invoke the alter ego or group of companies’ principles, it would undoubtedly result in the Court recognising a power vesting in the Arbitral Tribunal to compel the presence of a party who had never, at least ostensibly, agreed or conceded to its jurisdiction or authority to decide. Such a party would necessarily be one who had not even made a party to the proceedings by the referral court. This would clearly result in the Arbitral Tribunal seeking to exercise authority over a party and compelling it to join the proceedings even though it may have never been ad idem on disputes being resolved by way of arbitration. Thus, this would not only result in the Arbitral Tribunal travelling far beyond the contours of the arbitration agreement but negate the fundamental tenet of arbitration which is founded on consensus and agreement.
Thus, the Court held that the Sole Arbitrator has failed to bear in mind that the Act confers no authority upon an Arbitral Tribunal to wield powers akin to Order I Rule 10 of the CPC as specifically conferred on national courts as in the impugned order the Sole Arbitrator has proceeded to join the appellants on considerations which are recognized to constitute the basis for the exercise of power under Order I Rule 10 of the CPC.
[Arupri Logistics Pvt Ltd. v. Vilas Gupta, 2023 SCC OnLine Del 4297, decided on 24-07-2023]
Advocates who appeared in this case :
Mr. Jayant Mehta, Sr. Adv. with Mr. Raghav Bhatia, Ms. Unnimaya, Ms. Surekha Raman Advocates for the Appellants;
Mr. Jyoti Taneja, Mr. Shivam Malhotra, Mr. Ashish Rana, Ms. Sakshi Arora, Advs. for the R1;
Mr. S.D. Singh, Mr. Kartikay Bhargava and Mr. Siddharth Singh, Advs. for the R-4 to 7;
Mr. Ankit Singhal, Mr. Uday Pratap Singh, Advs. for the R-8 to 10.
