Court’s Decision
The Bombay High Court (Justices G.S. Kulkarni and Advait M. Sethna) held that a non-signatory cannot be compelled to arbitrate merely because it purchased property involved in a pending arbitration, unless there exists clear consent or derivative rights under law.
The Court quashed the arbitral tribunal’s order which had directed impleadment of the petitioner, a bona fide purchaser, in ongoing arbitral proceedings between real estate firms. It ruled that such impleadment suffers from a patent lack of inherent jurisdiction, violating the principles of party autonomy and privity of contract.
Reaffirming the limits of arbitral power under Section 16 of the Arbitration and Conciliation Act, 1996 (ACA), the Bench observed:
“Consent remains the cornerstone of arbitration. A non-signatory cannot be dragged into arbitral proceedings merely on the ground of derivative ownership or pendente lite purchase.”
Facts
The case arose from a real estate finance and development arrangement between two entities—one investor and one developer—under an Articles of Agreement dated 25 February 2017, by which ₹25 crores were advanced with a guaranteed return of ₹54 crores by March 2020.
Disputes led the investor to invoke arbitration under the agreement. While arbitration proceeded, another company purchased the land in question in March 2024 from a group company of the developer. The purchaser issued public notices, to which the investor objected, claiming an unregistered charge on the land.
The investor’s Section 9 application seeking injunction was dismissed by the District Judge, Pune, which found no registered charge or encumbrance on the property. That order attained finality after the investor’s appeal was withdrawn.
Subsequently, the investor moved the arbitral tribunal to implead the purchaser on the ground that it had bought the land pendente lite with knowledge of the arbitration. The arbitrator allowed the application, holding that the purchaser was “claiming through or under” a party and hence was bound by the arbitration clause.
The purchaser challenged this order before the High Court under Articles 226/227 of the Constitution.
Issues
- Whether a non-signatory, who is a bona fide purchaser of property, can be impleaded in an arbitration between others under the expression “claiming through or under” a party.
- Whether the arbitral tribunal acted in patent lack of jurisdiction by impleading such a purchaser.
- Whether the High Court’s writ jurisdiction under Articles 226/227 is maintainable in such cases despite the self-contained nature of the Arbitration Act.
Petitioner’s Arguments
The petitioner contended that it was a stranger to the arbitration agreement, having no shareholding, management, or contractual relationship with the developer or investor. The purchase of property was through an independent registered conveyance, long after the Section 9 petition had been dismissed.
It argued that mere purchase pendente lite cannot constitute consent to arbitration. Reliance was placed on Cox & Kings Ltd. v. SAP India Pvt. Ltd. (2024) 4 SCC 1, where the Supreme Court held that arbitration is founded on express or implied consent; commercial relationships alone do not suffice.
The petitioner submitted that the arbitrator’s order extended jurisdiction beyond statutory limits, conflating ownership transfer with contractual privity. Citing Cheran Properties Ltd. v. Kasturi & Sons Ltd. (2018) 16 SCC 413 and ONGC v. Discovery Enterprises Pvt. Ltd. (2022) 8 SCC 42, counsel argued that only cases of assignment, subrogation, or novation could attract “claiming through or under.”
The petitioner also relied on Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. (2025 SCC OnLine SC 806), where the Supreme Court held that tribunals cannot create contractual privity where none exists, and that the source of arbitral jurisdiction flows solely from consent.
Accordingly, the impugned order, which dragged a non-signatory into arbitration, amounted to a “jurisdictional usurpation” warranting writ interference.
Respondent’s Arguments
The investor argued that the arbitrator acted within jurisdiction under Section 16 of the ACA, which embodies the principle of kompetenz-kompetenz, enabling the tribunal to rule on its own jurisdiction.
It submitted that the purchaser had bought the land with full knowledge of the pending arbitration and the public notice, making it a lis pendens transferee and a person “claiming through or under” the developer. Reliance was placed on Devtree Corp. LLP v. Bhumika North Gardenia (Karnataka HC), where it was held that purchasers from parties bound by arbitration are also bound.
Citing Vidya Drolia v. Durga Trading Co. (2021) 2 SCC 1 and Ajay Madhusudan Patel v. Jyotrindra Patel (2025) 2 SCC 147, counsel submitted that issues of non-signatory impleadment are factual and best decided by the tribunal.
The investor further contended that the writ petition was not maintainable, as the petitioner had an alternative remedy under Section 34, and the arbitration framework being self-contained, writ interference was limited to cases of “patent lack of jurisdiction” or “bad faith.”
Analysis of the Law
The Court began by analyzing the scope of judicial review over arbitral orders under Articles 226/227. It referred to Deep Industries Ltd. v. ONGC Ltd. (2020) 15 SCC 706 and Bhaven Construction v. Executive Engineer (2022) 1 SCC 75, affirming that writ jurisdiction may be invoked only in exceptional cases where the order suffers from patent lack of inherent jurisdiction or is tainted by bad faith.
It reiterated that while the Arbitration Act is a self-contained code, the High Court’s constitutional power cannot be ousted by statute. However, judicial restraint must prevail to avoid derailing arbitral proceedings.
On the merits, the Bench held that the arbitrator’s decision to implead a non-signatory went beyond the limits of Section 16, which only empowers the tribunal to decide jurisdiction in relation to existing parties bound by an arbitration agreement.
The Court emphasized that “claiming through or under” under Section 8 ACA applies only where there exists derivative contractual rights, such as through assignment, subrogation, succession, or novation — not where the person merely purchased an asset unconnected with the underlying agreement.
The arbitrator’s finding that a pendente lite purchaser implies consent to arbitrate was held legally untenable, as consent cannot be inferred from knowledge of a dispute. Arbitration, being a consensual process, cannot be forced by equitable considerations of convenience or completeness.
Precedent Analysis
The Court relied extensively on the following decisions:
- Cox & Kings Ltd. v. SAP India Pvt. Ltd. (2024) 4 SCC 1 — reaffirmed that consent is the foundation of arbitration; non-signatories can be bound only under recognized exceptions.
- Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. (2025 SCC OnLine SC 806) — held that tribunals derive jurisdiction solely from consent under Section 7; compelling a non-signatory is a jurisdictional usurpation.
- Cheran Properties Ltd. v. Kasturi & Sons Ltd. (2018) 16 SCC 413) — “claiming through or under” applies where derivative contractual rights exist.
- ONGC Ltd. v. Discovery Enterprises Pvt. Ltd. (2022) 8 SCC 42) — party autonomy and privity of contract form the bedrock of arbitration.
- Deep Industries Ltd. v. ONGC Ltd. (2020) 15 SCC 706) and Bhaven Construction (2022) 1 SCC 75) — writ jurisdiction is available only where the tribunal acts in patent lack of jurisdiction.
The Bench distinguished Devtree Corp. LLP (Karnataka HC), holding that it cannot be applied to override the Supreme Court’s consistent emphasis on consent-based arbitration.
Court’s Reasoning
The Court reasoned that the arbitrator’s order effectively created contractual privity between the purchaser and the investor, which no law permits.
The tribunal’s jurisdiction arises only from the arbitration agreement between the signatories. The arbitrator cannot enlarge that scope by including a stranger, even if the transaction concerns the same subject matter.
It found that the petitioner was an independent purchaser under a registered conveyance, after the Section 9 proceedings had concluded, and therefore could not be deemed to be “claiming through or under” any party.
The Bench observed:
“Arbitral jurisdiction is not asset-based; it is consent-based. To equate ownership of property with privity to arbitration would destroy the voluntary foundation of the process.”
Consequently, the Court held that the arbitrator’s decision constituted a “patent lack of inherent jurisdiction”, justifying writ interference.
Conclusion
The Bombay High Court allowed the writ petition, setting aside the arbitrator’s order impleading the purchaser.
It held that the arbitrator exceeded his statutory mandate by compelling a non-signatory to arbitrate, thereby violating the fundamental principles of party autonomy and consent.
The Bench concluded:
“No person can be compelled to arbitrate without his consent. The arbitral tribunal’s power under Section 16 does not extend to rewriting the parties’ contract or binding a stranger to the arbitration.”
Implications
This judgment reinforces that consent is the non-negotiable foundation of arbitration.
It protects bona fide third-party purchasers and corporate entities from being wrongfully dragged into private arbitrations.
The decision also clarifies the scope of judicial intervention — while the High Court’s writ power remains intact, it will be sparingly exercised to correct patent jurisdictional overreach by arbitral tribunals.