The Bombay High Court has held that a non-signatory to an arbitration agreement cannot be compelled to participate in arbitral proceedings merely because it purchased the subject property during the pendency of the arbitration.
The Division Bench of Justice G.S. Kulkarni and Justice Advait M. Sethna quashed the arbitral tribunal’s order impleading Luxempire Realty Pvt. Ltd., as a respondent in an ongoing dispute between Eminence Landmarks LLP and Gagan Platinum Spaces LLP.
The Court noted that Luxempire Realty was a bona fide purchaser of land and was neither a party to the original 2017 agreement, nor did it derive any contractual rights “through or under” the signatories. Observing that the arbitration clause cannot bind non-signatories without express or implied consent, the Bench ruled that the arbitral tribunal had exceeded its jurisdiction in directing Luxempire’s impleadment.
Clarifying the limits of arbitral jurisdiction, the Bench remarked that an arbitral tribunal is not a civil court strictly governed by Order I Rule 3 of the Code of Civil Procedure, as parties choosing arbitration agree to a private forum of their own making. “An arbitral tribunal cannot be guided by the rules under the Code of Civil Procedure on joinder and non-joinder of parties,” the Court observed. The Court further observed that an arbitral tribunal “cannot confer upon itself jurisdiction where the law does not permit,” and that compelling a stranger to submit to arbitral proceedings “would subvert the very foundation of arbitral autonomy.
The Court held that the arbitrator’s order suffered from “patent lack of inherent jurisdiction” and that the High Court was justified in exercising its supervisory powers under Articles 226 and 227 of the Constitution. While reaffirming that judicial interference in arbitral proceedings must remain exceptional, the Bench clarified that intervention is warranted when an arbitral tribunal acts without any legal authority, resulting in manifest injustice.
The High Court accordingly set aside the tribunal’s order.
Appearances
Mr. Venkatesh Dhond, Senior Advocate with Mr. Rohan Kelkar, Ms. Karishma Rao, Mr. Vivek Shetty, Mr. Cheryl Fernandes, Mr. Ankit Pal andMr. Naman Nayyar i/b. AZB and Partners for Petitioner.
Mr. Darius Khambata, Senior Advocate with Mr. Rohaan Cama, Mr. Karan Rukhana, Mr. Kyrus Modi, Ms. Vidhi Shah, Mr. Hariprasad Shetty, Mr. Abhishek Srinivasan, Ms. Julius D’Souze and Mr. Pradeep Kumar for Respondent No.1.
Mr. Yash Jariwala for Respondent Nos.2 to 8.
Mr. Amir Arsiwala with Ms. Vaishnavi Dhure and Ms. Rashmi Jain for Respondent No.9.
