Non-Signatory Successor Company May Invoke Arbitration Clause After Merger: Calcutta High Court

The Calcutta High Court has recently held that a company that becomes the successor of an original contracting party pursuant to an NCLT-approved merger can invoke an arbitration clause even if it is not a signatory to the original agreement.

Justice Shampa Sarkar made the observation on February 3 while hearing an application filed by Tata Capital Limited seeking appointment of an arbitrator in a dispute arising out of a loan agreement with a borrower.

“In my prima facie view, even if the petitioner is a non-signatory, in view of the merger, the petitioner can invoke arbitration as the successor of the erstwhile lender,” the court said.

The dispute arose after Tata Capital Financial Services Ltd., which had sanctioned the loan to Arvind Manjhi, merged with Tata Capital Limited pursuant to an order passed by the National Company Law Tribunal, Mumbai Bench. The merger took effect from January 1, 2024. This resulted in the transfer of not just the assets but also the liabilities of the erstwhile Tata Capital.

Following Manjhi's default, the lender issued a loan recall notice on September 16, 2025. However, since no payment was forthcoming, the company invoked the arbitration clause in the loan agreement by issuing a notice on October 27, 2025, seeking reference of disputes to arbitration at Kolkata.

Despite service, the borrower did not appear. The court therefore examined whether a successor entity, which was not a signatory to the original agreement, could invoke the arbitration clause.

The court noted that the loan agreement defined the term “lender” to include its successors and assigns. It also recorded that the arbitration notice clearly disclosed the merger and explained how Tata Capital had stepped into the shoes of the original lender. The notice was received by the borrower, who raised no objection to Tata Capital's locus.

Relying on the apex court's rulings on non-signatories in Chloro Controls India Pvt Ltd v Severn Trent Water Purification Inc and Cox and Kings Ltd v SAP India Pvt Ltd and the doctrine of competence-competence, the court observed that questions relating to arbitrability, limitation, and jurisdiction were matters to be decided by the arbitral tribunal.

The court accordingly referred the parties to arbitration and appointed Suchishmita Ghosh as the sole arbitrator to adjudicate the dispute.