Summary: In a recent ruling, the Hon’ble Supreme Court of India has held that (a) non-signatories cannot attend arbitration proceedings, re-affirming the confidentiality mandate under Section 42A of the Arbitration and Conciliation Act, 1996 (“Act”); and (b) a court becomes functus officio once an arbitrator is appointed under Section 11(6) of the Act. With Section 42A as its shield and the doctrine of functus officio as its sword, the Hon’ble Supreme Court has once again underscored that arbitration is not a spectator sport.
The Hon’ble Supreme Court of India[1] has recently addressed two questions that reshape the contours of participation in arbitral proceedings and redefine who gets a seat at the table:
- First, whether it is permissible for a non-signatory to an agreement leading to arbitration proceedings to remain present in such arbitration proceedings and;
- Second, whether after appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Act”), it is within the court’s remit in such disposed off proceedings to issue further ancillary directions with respect to the arbitration proceedings that have commenced pursuant to the arbitrator’s appointment?
Before we dive into the court’s reasoning and unpack these propositions, it is essential to understand the factual backdrop that led to this landmark ruling.
Factual Backdrop
In June, 2015, an oral settlement was entered into between members of the Gupta family, namely Pawan Gupta and Kamal Gupta. This oral settlement was reduced into a memorandum of understanding/ family settlement deed (“MoU/FSD”), but it was not signed by Kamal Gupta’s son, Rahul Gupta. A petition under Section 11(6) of the Act was filed by Pawan Gupta against Kamal Gupta and others before the Hon’ble Delhi High Court, seeking appointment of an arbitrator for adjudicating disputes under the MoU/FSD (“Section 11 Proceedings”). An intervention application (“Intervention Application”) was filed by Rahul Gupta, a non-signatory in the Section 11 Proceedings, seeking to oppose the very maintainability of the Section 11 Proceedings. Pawan Gupta and others also filed a petition under Section 9 of the Act (“Section 9 Petition”), seeking certain interim measures.
In March, 2024, the Hon’ble Delhi High Court appointed a sole arbitrator and the Section 9 Petition was directed to be treated as an application under Section 17 of the Act. The Intervention Application was dismissed as Rahul Gupta was a non-signatory to the MoU/ FSD. This is how the Section 11 Proceedings and the Section 9 petitions were disposed off (“Appointment Order”).
Thereafter, in August, 2024, two non-signatory companies (and other non-signatory intervenors), through their authorised representative Rahul Gupta, filed another application in the disposed off Section 11 proceedings, seeking permission to be present in the arbitration proceedings before the sole arbitrator, revival of the Intervention Application, access to all pleadings, orders and awards before the sole arbitrator and a recall of the Appointment Order.
The Hon’ble Delhi High Court allowed the non-signatory interveners’ (including Rahul Gupta’s) prayer to be present in the arbitration proceedings, either personally or through counsel. However, the Delhi
High Court refused to recall the Appointment Order. The Court further stated that properties of the intervenor companies listed in Annexure A and B of the submissions filed by Rahul Gupta were to be excluded from the arbitral proceedings, and that arbitration regarding the properties in Annexure B would be limited to 77% thereof. It is against the above directions that Pawan Gupta and Kamal Gupta filed Special Leave Petitions before the Hon’ble Supreme Court of India.
Arguments on behalf of the Parties
The Petitioners argued that the Hon’ble Delhi High Court had no jurisdiction to entertain the interim applications moved by non-signatories to the MoU/ FSD after disposal of the proceedings under Section 11(6) of the Act as the Hon’ble Delhi High Court had become functus officio post the disposal. The Petitioners also argued that as per Section 35 of the Act, the arbitral award issued in the course of the arbitration proceedings shall be binding solely on the ‘parties’ involved in the arbitration proceedings, as well as those claiming through such parties. Since the intervenors were not parties to the MoU/ FSD, they would not be bound by the (to be) issued award. Therefore, the direction to non-signatory intervenors, allowing them to be present during arbitration proceedings was without jurisdiction. Further, permitting a non-signatory and/ or a non-party to attend arbitration proceedings violates the Act’s provisions and confidentiality requirements under Section 42A.
The Respondents on the other hand argued that allowing Rahul Gupta to attend the arbitration proceedings and recognising his rights in the family properties were based on the undertaking given by the signatories to the MoU/ FSD. It was further argued that none of the directions issued by the Hon’ble Delhi High Court could be said to be beyond the scope of the Act.
Findings and Reasonings of the Hon’ble Supreme Court
The Hon’ble Supreme Court of India allowed the Special Leave Petitions and held that:
- Provisions of Section 35 of the Act are clear. An award passed would only bind parties to the arbitration and persons claiming through such parties. Upon determining that the arbitral award does not bind non-parties to the MoU/FSD due to them being non-signatories to the said documents, there is no legal basis for permitting a non-signatory to the MoU/FSD to participate in the arbitral proceedings.
- There is no legal right conferred by the Act that would enable a non-party to the agreement to attend arbitration proceedings between signatories to the agreement.
- 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.
- Permitting a stranger to the arbitration proceedings to attend and observe would result in breach of the provisions of Section 42A (confidentiality) of the Act. Therefore, non-signatories cannot be allowed to be present in arbitration proceedings.
- Once the sole arbitrator was appointed, pursuant to the authority granted under Section 11(6) of the Act, the Hon’ble Delhi High Court did not have any jurisdiction to entertain a fresh application seeking permission to attend the arbitration proceedings. The Hon’ble Delhi High Court was functus officio after concluding the proceedings under Section 11(6) of the Act and could not consider a further prayer.
Conclusion
Therefore, the Hon’ble Supreme Court of India has held that non-signatories cannot attend arbitration proceedings, re-affirming the confidentiality mandate under Section 42A of the Act, and that a court becomes functus officio once an arbitrator is appointed. With Section 42A as its shield and the doctrine of functus officio as its sword, the Hon’ble Supreme Court has once again underscored that arbitration is not a spectator sport.
Although arbitration’s flexibility must prevail over dogmatic formalism, foundational principles cannot be ignored. Allowing non-signatories a seat at the table undermines confidentiality, the essence of arbitration proceedings, and dilutes the sanctity of consent. Arbitration is a private, consensual and confidential dispute resolution process and the Hon’ble Supreme Court has preserved its integrity by upholding the fundamental principles of contractual sanctity, party autonomy, and procedural discipline. Pursuant to this ruling, tribunals must deny requests from non-signatories to observe arbitration proceedings, ensure authorised attendance only and must carefully monitor accesses to the arbitral record.
On the arbitration pitch, the Hon’ble Supreme Court has played a cover drive — elegant, precise, and firm in its stance. In Section 42A’s tight field placement of confidentiality, non-signatories are declared out before they even pad up. And once the arbitrator takes guard, the court walks back into the pavilion — functus officio, its innings complete. With this ruling, the Hon’ble Supreme Court has made it clear: arbitration is not a free-for-all net session — it’s a match between teams that have signed up, played by the rules, and the boundaries.
For further information, please contact:
Kapil Arora, Partner, Cyril Amarchand Mangaldas
kapil.arora@cyrilshroff.com
[1] Kamal Gupta & Anr. v. M/s L.R Builders Private Limited SLP (C) Nos. 4775-4779 of 2025
