Non-Signatories Have No Right To Attend Arbitration Proceedings, Their Presence Breaches Confidentiality : Supreme Court

The Supreme Court on Wednesday (Aug. 13) observed that a party non-signatory to an arbitration agreement cannot participate in the arbitration proceedings, as the signatories to an arbitration agreement are only entitled to remain present in the arbitration proceedings.

The bench comprising Justices PS Narasimha and AS Chandurkar set aside the Delhi High Court's decision, which allowed the non-signatories to an arbitration agreement to attend the arbitration proceedings in the presence of their counsels.

Thus, the Court considered the issue of “Whether it is permissible for a non-signatory to an agreement leading to arbitration proceedings to remain present in such arbitration proceedings?”

Answering in the negative, the judgment authored by Justice Chandurkar observed:

“Once it is clear that the arbitral award would not bind non-parties to the said MoU/FSD as such parties were not signatories to the said documents, there would be no legal basis whatsoever to permit a non-signatory to the MoU/FSD to remain present in the proceedings before the sole arbitrator. When the arbitration proceedings can take place only between parties to an arbitration agreement and Section 35 of the Act does not make the arbitral award to be passed binding on non-signatories to such agreement, we do not find any 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 court observed.

Briefly put, an oral family settlement (2015) between the Appellants-Pawan Gupta (PG) and Kamal Gupta (KG), was later formalized in a MoU/Family Settlement Deed (2019), which excluded one of the Respondent-Rahul Gupta.

An arbitration clause was invoked under the MoU's arbitration clause, wherein the Respondent-Rahul Gupta, sought intervention, despite not being a signatory to the agreement.

Initially, the High Court was not inclined to allow an intervention application permitting non-signatory's presence in the arbitration proceedings, but later on permitted him to attend the arbitration proceedings, post-referral stage i.e., after appointment of arbitration.

Against the High Court's decision, the party's signatory to the arbitration agreement approached the Supreme Court.

Setting aside the High Court's decision, the judgment authored by Justice Chandurkar said that despite the non-signatory attending the proceedings, the award passed would not be binding on them, and the only recourse available with them is under Section 36 of the Arbitration & Conciliation Act, 1996 to challenge the enforcement of an award.

“Permitting a stranger to remain present in the arbitration proceedings especially when the award to be passed would not be binding on such stranger would be charting a course unknown to law. The remedy, if any, to a party who is not a signatory to the agreement is available under Section 36 of the Act if such award is sought to be enforced against him.”, the court said.

Permitting Non-Signatory Breaches Confidentiality Of Arbitration Proceedings

“At this stage, it is necessary to refer to the provisions of Section 42A of the Act. The arbitrator, the arbitral institution and the parties to the arbitration agreement have to maintain confidentiality of all arbitral proceedings. The legislative intent behind maintaining confidentiality of information is quite clear. Permitting a stranger to the arbitration proceedings to remain present and observe the said proceedings would result in breach of the provisions of Section 42A of the Act. Even on this count the impugned order cannot be sustained.”, the court said.

Accordingly, the Appeal was allowed.

Cause Title: KAMAL GUPTA & ANR. VERSUS M/S L.R. BUILDERS PVT. LTD & ANR. ETC. (and connected matter)

Citation : 2025 LiveLaw (SC) 799

Click here to read/download the judgment

Appearance:

For Petitioner(s) :Mr. C. Aryama Sundaram, Sr. Adv.(Arguing Counsel) Ms. Meenakshi Arora, Adv. Mr. Abhishek Gupta, Adv. Mr. Gaurav Sethi, Adv. Mr. Dhiraj Abraham Philip, AOR Mr. Chandratanay Chaube, Adv. Mr. Rahul Pawar, Adv. Mr. V Giri, Sr. Adv.(Arguing Counsel) Ms. Malvika Trivedi, Sr. Adv. Mr. Himanshu Satija, Adv. Mr. Karan Khanna, Adv. Mr. Harshit Khanduja, Adv. Ms. Sujal Gupta, Adv. Mr. Harshed Sundar, Adv. Ms. Neha Mehta Satija, AOR Ms. Simran Mulchandani, Adv. Mr. Vishal Sharma, Adv. Mr. Pulkit Khanduja, Adv. Mr. Shailendra Slaria, Adv. Mr. Rushabh Kapadia, Adv.

For Respondent(s) :Mr. Amit Sibal, Sr. Adv.(Arguing Counsel) Mr. Akhil Sibal, Sr. Adv.(Arguing Counsel) Ms. Bansuri Swaraj, Sr. Adv.(Arguing Counsel) Mr. J Sai Deepak, Sr. Adv.(Arguing Counsel) Ms. Jyoti Taneja, Adv. Ms. Kanika Singhal, AOR Mr. Shekhar Gupta, Adv. Mr. Shivek Trehan, Adv. Mr. Abhishek Mishra, Adv. Mr. Moksh Tyagi, Adv. Ms. Muskan Puri, Adv. Mr. Kartik Kumar, Adv. Ms. Ishika, Adv. Mr. Ishan Kumar, Adv. Ms. Ayushi Sinha, Adv.