Confirming Party Cannot Invoke Arbitration Clause Without Express Contractual Right: Delhi High Court

The Delhi High Court on 4 May held that a party described only as a “Confirming Party” or merely having signatory status in an agreement cannot invoke the arbitration clause unless the contract expressly grants such a right.

Justice Harish Vaidyanathan Shankar dismissed petitions filed by The Atlas Electric Industries Pvt. Ltd. seeking interim protection and appointment of an arbitrator in a dispute concerning an industrial plot in Haryana. He held:

“The arbitration clause, in express terms, does not include the Confirming Party within the category of parties entitled to invoke arbitral proceedings. Once the explicit stipulations of the Agreement do not contemplate or confer such a right upon the Confirming Party, it cannot, by way of imputation or implication, be contended that a mere signatory status to the Agreement would, in and of itself, suffice to vest the Confirming Party with the entitlement to invoke the arbitration clause.”

The dispute concerned Industrial Plot No. 174, Sector-4, IMT Bawal, Rewari, Haryana.

Atlas Electric Industries had entered into a Joint Memorandum of Settlement dated 30 October 2021 regarding the property. Subsequently, under an Agreement to Sell dated 10 November 2021, the property owner was described as the “First Party/Vendor/Seller”, while Polotrips India (P) Ltd. was named the “Second Party/Vendee/Buyer”. The agreement described Atlas Electric only as the “Confirming Party”.

Under the Agreement to Sell, Atlas Electric nominated Polotrips India as its “Nominee/Financial Partner”. The property stood mortgaged to Karnataka Bank Ltd. against loan accounts linked to Carafor Foam Pvt. Ltd.

The proposed sale aimed to facilitate a Rs. 6 crore One Time Settlement, and the bank agreed in principle on 18 October 2021 and 10 November 2021 to release the property upon payment.

Clause 15 of the Agreement provided that if the seller failed to execute the sale deed despite the buyer offering payment, the buyer could either seek refund with interest or seek specific performance through arbitration before a Court-appointed arbitrator.

Atlas Electric approached the High Court under Section 9 of the Arbitration and Conciliation Act, 1996 seeking to restrain transfer of the property. On 17 July 2025, the Court restrained Aneel Sahni, representing the seller and owner, from creating third-party rights in the property pending proceedings.

Atlas Electric later filed a petition under Section 11 seeking appointment of an arbitrator under Clause 15. Aneel Sahni sought vacation of the interim protection and argued that Clause 15 granted arbitration rights only to the buyer against the seller and not to Atlas Electric as a “Confirming Party”. It argued that its status as a signatory entitled it to invoke arbitration and relied on precedents recognising rights of confirming parties.

The Court rejected the contention. It held that the parties consciously intended to exclude the “Confirming Party” from invoking the arbitration mechanism. It observed:

“The intention of the parties is to be discerned from a holistic reading of the Agreement, and the conspicuous non-inclusion of the Confirming Party within the ambit of the arbitration clause renders it evident, to the mind of this Court, that the parties consciously intended to exclude the Confirming Party from invoking the arbitral mechanism.”

Justice Shankar also noted that Atlas Electric transferred its interests in the transaction to Polotrips India after nominating it as buyer and that any surviving dispute existed only between Polotrips India and the seller.

Accordingly, the High Court dismissed both the Section 9 and Section 11 petitions.

Appearances for The Atlas Electric Industries Pvt. Ltd.: Advocates Ankit Jain, Senior Advocate, Rahul Tyagi, Aaditya Singh.

Appearances for M/s Polotrips India (P) Ltd.: Advocate Prakhar Mittal.

Appearances for Aneel Sahni: Senior Advocate Inderbir Singh Alag and Advocate Rakesh Kumar Yadav.