Unveiling The Legal Tapestry On “Claiming Through Or Under”: An Analysis Of The Group Of Companies Doctrine In The Indian Context

The Group of Company doctrine entails that an arbitration agreement entered into by one of the companies within a group of companies has an effect of binding a non-signatory affiliate

‘Group of Company’ doctrine ("Doctrine”) has been one of the most widely debated tenet in the Indian arbitration jurisprudence, and as such, required clarity for it to be aligned with the most fundamental principles of arbitration, contract and corporate laws viz. ‘party autonomy’, ‘privity of contract’, and ‘separate legal personality’. In this context, the Bench comprising five judges of the Indian Supreme Court modestly commented as follows, while answering the question of the Doctrine’s applicability which does much more than just adding a chapter for a coherent read:    

“In Law’s Empire, Ronald Dworkin proposed a hypothetical where a group of novelists write a novel seriatim, each novelist interpreting the chapters given to them to write a new chapter. The novelists were expected to “take their responsibilities of continuity more seriously” to create “a single unified novel that is the best it can be…… In this case, we have added another chapter to the theory of group of companies’ doctrine. Our aim was to make further progress in the course of evolution of arbitration law. In the process, we have tweaked the plotline to make the novel a more coherent read, instead of rewriting or discarding the previous chapters.” 

A.The ‘Doctrine’:

The Doctrine entails that an arbitration agreement entered into by one of the companies within a group of companies has an effect of binding a non-signatory affiliate. In this context, the earlier legal position laid down by the Apex Court in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1SCC 641 used the test of ‘claiming through or under’ as the determinant to bind such non-signatory affiliate. The basis of the Apex Court employing the said test in Chloro Control emanated from the use of phrase ‘any person claiming through or under’ in Sec. 45 of the Arbitration and Conciliation Act, 1996 (“Act”) while dealing with the said issue in context of an international commercial arbitration. The said test came to be adopted even for domestic arbitrations with respect to Section 8 and Section 11 of the Act.  Therefore, while examining the said doctrine in view of conflicting principles, the Apex Court in Cox and King (“Judgement”) was conscious of adopting a balanced approach without compromising on the basic principles of arbitration law, contract law, and company law to ensure that the resultant legal framework is consistent with internationally accepted practices and principles. 

B.Legal Issues: 

The following questions of law  were referred to the five judges Bench for determination, owing to inconsistent approaches adopted by various courts while applying the Doctrine: 

1.Whether the group of companies’ doctrine should be read into Section 8 of the Arbitration Act or whether it can exist in the Indian jurisprudence independent of any statutory provision;

2.Whether the group of companies’ doctrine should continue to be invoked on the basis of the principle of ‘single economic reality;’

3.Whether the group of companies’ doctrine should be construed as a means of interpreting implied consent or intent to arbitrate between the parties; and

4.Whether the principles of alter ego and/or piercing the corporate veil can alone justify pressing the doctrine into service even in the absence of implied consent.

The Apex Court, in Judgement, after analyzing Section 7 of the Act, held that;

(i) an arbitration agreement stems from a legal relationship, whether contractual or otherwise;

(ii) when the legal relationship is contractual, its nature can be discerned using general contract law principles;

(iii) signatory status is not mandatory for being bound by an arbitration agreement; 

(iv) in the case of non-signatory parties, the crucial consideration for the courts is whether these parties intended or consented to be bound by the arbitration agreement or the underlying contract, evident through their actions or conduct; 

(v) strict adherence to the requirement of a written arbitration agreement is necessary, but the form of recording such an agreement is inconsequential; 

(vi) the obligation for a written arbitration agreement doesn't preclude the binding of non-signatory parties if a defined legal relationship exists between signatory and non-signatory parties; and 

(vii) once the validity of an arbitration agreement is established, the court or tribunal can determine which parties are bound by this agreement. 

After establishing the abovementioned observations, the Court went ahead to analyze the contours of the Doctrine and its applicability in the Indian arbitration jurisprudence. 

C.Decoding The Observations Of The Court:

The Court, after delving into domestic (Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.,(2013) 1SCC 641) and international jurisprudence (Dow Chemical v. Isover Saint Gobain), held that the courts and tribunals across the world have been applying traditional contractual and commercial doctrines to determine the consent of ‘non-signatory’ parties to be bound by the arbitration agreement. The Doctrine, being one such consent-based doctrine which can be applied to identify the real intention of the parties to bind a non-signatory to an arbitration agreement. 

At the outset, the court clarified that the requirement of a written arbitration agreement under Section 7 of the Act would not be understood to exclude the possibility of binding non-signatory parties. That while examining the factual scenario, it is imperative that the following conditions are satisfied: 

1.Firstly, the existence of a group of companies;

2.Secondly, the conduct of the signatory and non-signatory parties indicating their common intention to make the non-signatory a party to the arbitration agreement.

The Court relied on the UNIDROIT (formally known as International Institute for the Unification of Private Law) Principle of International Commercial Contract, 2016 (Article 4.3) which elucidated the factors which can be considered while ascertaining the subjective intention of parties to make a non-signatory a party to the arbitration agreement. These factors include preliminary negotiations, practices between the parties, the nature and purpose of contract, the conduct of the parties and subsequent conclusion of the contract, the nature and purpose of the contract, to name a few. 

Threshold standard

The Apex Court, while outlining the standard of involvement of a non-signatory in an arbitration agreement, noted that the involvement of a non-signatory must have a positive, direct, and substantial involvement in the negotiation, performance, or termination of the contract. Mere incidental involvement of a non-signatory in the arrangement cannot be sufficient to infer the consent of a non-signatory party. Therefore, the only question that needs to be answered in such a situation is whether a non-signatory party has consented to the arbitration agreement or not, de hors the question of it having consented to the substantial contract entered between the parties. 

The court noted that the factors laid down in Oil and Natural Gas Corporation v. Discovery Enterprises Pvt. Ltd. (2002) 8 SCC 42 must be considered while determining the applicability of the Doctrine. The factors enunciated by the Court are as follows: 

“40. In deciding whether a company within a group of companies which is not a signatory to arbitration agreement would nonetheless be bound by it, the law considers the following factors: (i) The mutual intent of the parties; (ii) The relationship of a non-signatory to a party which is a signatory to the agreement; (iii) The commonality of the subject-matter; (iv) The composite nature of the transactions; and (v) The performance of the contract.”

Therefore, what needs to be noted is whether the commercial dispute sufficiently implicates the non-signatory party for the arbitral tribunal to exercise its jurisdiction. Prioritizing the jurisdictional boundaries of the arbitral tribunal in relation to the dispute’s subject matter among signatory parties is crucial for fostering effective arbitration and avoiding unnecessary dispute fragmentation. 

“Claiming through and under”: Key observations by the Apex Court 

The Apex court recorded that the judgement of Chloro Controls  is inaccurate to the extent that it traced the Doctrine to the phrase “claiming through or under” and is against the principles of contract law and corporate law. The observations made by the Apex Court, in brief, are provided hereinbelow: 

1.The Court noted that the phrase “claiming through or under” does not find its mention either in Section 2(1)(h) of the Act, dealing with the definition of party, or under Section 7 of the Act, which encapsulates the essentials of an arbitration agreement. 

2.That, it is only through a contract of assignment, subrogation, and novation, that a party can claim through or under another party, and not otherwise. 

3.That, a person “claiming through or under” can assert a right in a derivative capacity, which is through the party to the arbitration agreement, to participate in the agreement;

4.The persons claiming through or under do not possess an independent right to stand as parties to an arbitration agreement, but as successors to the signatory parties’ interest; 

Thus, if the circumstances are such as to demonstrate the mutual intention of the parties to bind both signatories and non-signatories, a non-signatory could be referred to an arbitration proceeding. 

Redefined scope of Arbitral Tribunal’s jurisdiction 

The Court noted that the determination w.r.t whether the non-signatory is a party to the arbitration agreement, vis-à-vis Section 8 and 11 of the Act, is a matter of conceptual interpretation, which must be adjudicated by the arbitral tribunal. In doing so, the tribunal will be required to take note of the factual, legal, and circumstantial aspects of the matters, wherein the factors elaborated hereinabove (threshold standard) will aid the arbitral tribunal in making a thoroughly informed decision. 

Therefore, a clear demarcation has been created by the Court, wherein, the referral court once satisfied about the existence of an arbitration agreement, need not delve into the question of whether a non-signatory is a party to the arbitration agreement. This interpretation, as elaborated hereinabove, upholds the doctrine of kompetence-kompetence, leaving the determination of the true parties to an arbitration agreement to the arbitral tribunal as outlined in Section 16 of the Act.

D.Take Away For Future Proceedings:

In conclusion, the intricate web of ambiguity surrounding the applicability of the Doctrine has been clarified by the Apex Court. This codified certain objective criteria for a Section 11 or a Section 8 Court to assess any objections raised, for and against the applicability of the Doctrine in specific cases. The judgment is likely to also ensure that a party who tries to avoid its liability under the garb of being a ‘non-signatory’ is nipped in the bud and such mischief is curbed at the threshold.


1. Cox and Kings Ltd. v. SAP India Pvt. Ltd, 2023 INSC 1051 (@ paragraph 151). 

2. Cheran Properties Ltd v. Kasturi and Sons Ltd, (2018) 16 SCC 413 [2018 INSC 394];

3. Agri Gold Exims Ltd v. Sri Lakshmi Knits & Wovens, (2007) 3 SCC 686;

4. Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited

5.  Supra 1 (@paragraph 95). 

6. Supra 1 (@paragraph 5). 

7. Gary Born, International Commercial Arbitration Law and Practice (3rd ed, 2012) 2, 1559.

8. UNIDROIT Principles of International Commercial Contracts, 2016, Article 4.3. 

9. (2013) 1SCC 641.

10. Supra 1 (@ paragraph 2).

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