The Supreme Court of India has held that parties who have not signed an arbitration agreement may still be included in arbitration proceedings if the dispute could substantially affect their rights. the Court clarified that the issue depends on the facts of each case and that the arbitral tribunal retains the authority to make the final determination.
Background
The dispute concerns a 3,500-square-foot commercial unit at Manish Commercial Centre, Dr. Annie Besant Road, Worli, Mumbai. The property originally belonged to M/s Prospective Traders, a partnership firm established in 1977.
The dispute arose from successive changes in the firm's constitution and competing claims over the property. The appellants, Hemant D. Shah HUF and another, alleged that a retirement deed dated July 3, 1995, under which they were said to have left the partnership, was forged. They maintained that they had never retired and that the original partnership continued to hold rights over the property.
The third and fourth respondents subsequently became partners under later arrangements. Their claimed rights over the property depended, in part, on the validity of the appellants' alleged retirement.
The matter reached the Bombay High Court under Section 11 of the Arbitration and Conciliation Act, 1996, which provides for the appointment of arbitrators by courts. The High Court declined to include the third and fourth respondents in the arbitration because they had not signed the partnership deed dated December 9, 1985, which contained the arbitration clause.
A Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran examined whether the third and fourth respondents could be treated as parties to the arbitration despite not signing the original agreement.
The Court considered the principles laid down in Cox & Kings Ltd. v. SAP India Pvt. Ltd. and Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd. It explained that the absence of a signature does not, by itself, rule out a person's inclusion in arbitration. The relationship between the parties, their conduct and the potential impact of the dispute on their rights must also be considered.
The Bench observed that the alleged retirement of the appellants in 1995 was central to the dispute. If that deed were found invalid, the parties' rights could be affected by the earlier partnership arrangement, with consequences for the third and fourth respondents' claims under subsequent partnership deeds.
The judgment stated:
"The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties."
The Court clarified that its assessment at the stage of referring a dispute to arbitration was preliminary. The arbitral tribunal would retain the authority to examine the relevant evidence and determine whether the non-signatory parties were ultimately bound by the arbitration agreement.
The Supreme Court modified the High Court's order to recognise the third and fourth respondents as parties to the arbitration, despite their not having signed the partnership deed dated December 9, 1985.
However, the Bench made clear that its finding was only prima facie, meaning preliminary and not a final determination. The questions of limitation and whether the appellants were barred from including the third and fourth respondents because they had not been joined in earlier arbitration proceedings were left open for the arbitral tribunal to decide.
The Court disposed of the appeal with these modifications and observations.
Case Details
- Case Title: Hemant D. Shah HUF & Anr. v. Chittaranjan D. Shah HUF & Ors.
- Case Number: Civil Appeal arising out of SLP (C) No. 26474 of 2026
- Judges: Justice J.B. Pardiwala and Justice K. Vinod Chandran
- Decision Date: October 12, 2026
