Supreme Court urges Law Ministry to take serious look at arbitration regime, make changes to 2024 Bill

In a pointed critique of India’s arbitration framework, the Supreme Court has expressed strong disapproval over the continued absence of statutory clarity on the power of arbitral tribunals to implead non-signatories, despite decades of litigation and multiple judicial pronouncements [ASF Buildtech Pvt Ltd v. Shapoorji Pallonji and Company Pvt Ltd]..A Bench of Justices JB Pardiwala and R Mahadevan said that the proposed Arbitration and Conciliation (Amendment) Bill, 2024 - currently under consideration of the Ministry of Law and Justice - fails to address a long-standing legislative vacuum.“What is expressly missing in the Act, 1996 is still missing in the Arbitration and Conciliation Bill, 2024...despite a catena of decisions...highlighting the need for statutory recognition of such power in order to obviate all possibilities of confusion,” the Court noted..The Bench said that it was “very sad” that even after nearly thirty years since the 1996 Act was enacted to modernise arbitration in India, procedural ambiguities continue to persist..In a direct recommendation to the executive, the Court urged the Department of Legal Affairs to revisit the current draft of the Bill and bring in necessary reforms.“We urge the Department of Legal Affairs, Ministry of Law and Justice to take a serious look at the arbitration regime that is prevailing in India and bring about necessary changes while the Arbitration and Conciliation Bill, 2024 is still being considered.".The observations were made in a judgment which dismissed ASF Buildtech’s challenge to its impleadment in arbitral proceedings despite it being a non-signatory to the arbitration agreement. The Court upheld the tribunal’s decision, noting that the ASF Group companies functioned as a single economic entity and that ASF Buildtech’s conduct demonstrated an intention to be bound by the agreement.The case arose from disputes related to construction and development agreements executed among entities of the ASF Group and SPCPL. The ASF Group, comprising ASF Buildtech (ABPL), ASF Insignia SEZ Pvt Ltd (AISPL), and Black Canyon SEZ Pvt Ltd (BCSPL), had engaged SPCPL as a contractor for infrastructure works.While BCSPL was the formal signatory to a 2020 settlement agreement with SPCPL, the latter filed counterclaims against not only BCSPL but also AISPL and ABPL. SPCPL contended that the ASF Group functioned as a single economic unit and that the arbitration agreement contained in the original works contract dated November 21, 2016 should be enforced against all three entities under the Group of Companies Doctrine.ABPL challenged its inclusion before the tribunal by filing a Section 16 application under the Arbitration and Conciliation Act, 1996, asserting it was not a party to the arbitration agreement and could not be subjected to the proceedings. When the arbitral tribunal dismissed the objections, ABPL appealed to the Delhi High Court under Section 37, which also ruled against it. This prompted the company to approach the Supreme Court..ASF Buildtech was represented by Senior Advocate Devadatt Kamat with Advocates Dr Amit George, Anindita Mitra, Harsh Pandey and Hruday Bajentri..Shapoorji Pallonji was represented by Advocates Aakanksha Kaul, Saurav Agrawal, Salvador Santosh Rebello, Aman Sahani, Anshuman Chowdhary, Rhea Borkotoky, Akash Saxena, Kritika, Ashima Chopra, Prachi Dubey and Pooja Gill..Blackstone Canyon SEZ was represented by Senior Advocate Jayant Mehta with Advocates SS Shroff, Shruti Sabharwal, Avlokita Rajvi, Lakshya Khanna, Vikramaditya Sanghi and Sanskriti Sinha..ASF SEZ was represented by Advocates Sanyat Lodha and Sanjana Saddy..[Read Judgment]