The Supreme Court has ruled that a person who did not sign a Memorandum of Settlement (MoS) can still be referred to arbitration if their role and obligations are closely connected with the performance of that settlement. Setting aside part of the Delhi High Court's judgment, the Court held that shareholder Ashiesh Shukla, despite being a non-signatory to the MoS, was a "veritable party" because his participation was essential for completing the transaction contemplated under the settlement.
Background of the Case
The dispute arose from a Memorandum of Settlement dated May 9, 2022, under which KKH Finvest Pvt. Ltd. agreed to acquire Sensorise Digital Services Pvt. Ltd. and its sister concern for ₹8 crore. The settlement required not only the promoters but also management team members and certain shareholder-consanies to transfer their shares and comply with related obligations such as confidentiality, non-compete, and intellectual property assignments.
Ashiesh Shukla, who held a small shareholding in the company, was not a signatory to the MoS. However, he executed a separate Share Purchase Agreement on the same day, transferring his shares as part of the larger transaction. When disputes later arose, KKH Finvest sought to include him in arbitration proceedings.
The Delhi High Court had declined to refer Shukla to arbitration, observing that a clause in his Share Purchase Agreement treated the transfer of shares as independent of the MoS and therefore did not bind him to the arbitration clause contained in the settlement.
Supreme Court's Observations
A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva found that the High Court had overlooked an important fact: identical clauses appeared in the Share Purchase Agreements executed by other management team members who had nevertheless been referred to arbitration.
The Bench observed:
"There was no real point of distinction between Ashiesh Shukla when compared to the other similarly placed shareholders."
The Court noted that Shukla's own Share Purchase Agreement expressly acknowledged that it had been executed pursuant to the MoS and that he agreed to transfer his shares as part of the overall settlement. Without his participation, the buyer could not achieve the intended 100% acquisition of the company, making his role fundamental to the transaction.
Relying on the Supreme Court's earlier decision in Cox and Kings Ltd. v. SAP India Pvt. Ltd., the Bench reiterated that a non-signatory may still be bound by an arbitration agreement if the person's conduct, legal relationship with the signatories, and involvement in performing the underlying contract demonstrate an intention to be part of the transaction.
"The participation of a non-signatory in the performance of the underlying contract is an important indicator of the intention to be bound by the arbitration agreement," the Bench noted while applying the principles governing "veritable parties."
Court's Decision
Allowing the appeal, the Supreme Court set aside the Delhi High Court's findings concerning Ashiesh Shukla. The Court held that he is a veritable party to the Memorandum of Settlement and that disputes involving him are also capable of being resolved through arbitration.
The Bench referred his disputes to the same arbitral proceedings already pending before Justice T.S. Thakur (Retd.), former Chief Justice of India, who had earlier been appointed as the sole arbitrator.
The Court clarified that all factual and legal issues remain open for determination by the arbitrator and directed the parties to bear their own costs.
Case Details
Case Title: KKH Finvest Pvt. Ltd. and Another v. Ashiesh Shukla and Others
Case Number: Civil Appeal No. ___ of 2026 (@ Special Leave Petition (C) No. 4222 of 2025)
Judge: Justice Sanjay Kumar and Justice Sanjeev Sachdeva
Decision Date: August 5, 2026
