Arbitrating With Non-Signatories After Cox And Kings: Practice, Procedure, And Risk Management

Executive Summary

The Group of Companies Doctrine is valid in Indian law, but its application requires proof of implied consent—not mere corporate affiliation. The Supreme Court's Constitution Bench inCoxand Kings Ltd. v. SAP India Pvt. Ltd. (2023)¹ has authoritatively settled that a non-signatory can be bound to an arbitration agreement only where evidence demonstrates: (i) the non-signatory played a positive, direct, and substantial role in the negotiation, performance, or termination of the contract; and (ii) there existed mutual intention among all parties—signatories and non-signatories alike—to be bound by the arbitration clause.

This judgment fundamentally recharacterizes the doctrine from one based on 'single economic reality' to one grounded in consent. Practitioners must now focus on conduct-based evidence rather than corporate structure. The practical implications are threefold: (i) courts will only make prima facie determinations at the referral stage, leaving substantive questions to the tribunal; (ii) the burden of proof lies on the party seeking joinder; and (iii) cross-border enforcement remains risky, as jurisdictions like the UK and Singapore reject the doctrine entirely.

A. The Settled Position: Arbitration Requires Consent

Arbitration is axiomatically a creature of consent.² Unlike litigation, where courts derive jurisdiction from sovereign authority, arbitral tribunals possess only the jurisdiction that parties have contractually conferred upon them. This foundational principle finds expression in the requirement that an arbitration agreement be 'in writing'³ and, traditionally, signed by those who would be bound by it. The doctrine of privity of contract reinforces this: only parties to a contract can enforce or be bound by its terms.

Corporate law supplements this with the principle of separate legal personality.⁴ Each company within a corporate group is a distinct legal entity, capable of holding property, entering contracts, and suing or being sued in its own name. A parent company is not liable for its subsidiary's obligations; a subsidiary is not bound by its parent's commitments. These principles—consent, privity, and separateness—form the traditional framework for determining who may participate in arbitration.

B. The Complication: Corporate Groups and Commercial Reality

Modern commercial transactions rarely respect these tidy boundaries. Multinational enterprises routinely structure transactions through multiple entities within a corporate group, fragmenting what is economically a single venture across parent companies, subsidiaries, affiliates, and special purpose vehicles.⁵ This fragmentation serves legitimate purposes—tax efficiency, liability management, regulatory compliance—but it creates a dilemma when disputes arise.

Consider a paradigmatic scenario: a parent company negotiates a contract, its subsidiary signs it, and another affiliate performs it. When the transaction fails, the counterparty wishes to arbitrate against all three entities—the negotiator, the signatory, and the performer. Yet only one has signed the arbitration agreement. Strict application of privity would allow the parent company to 'pull the strings' of the transaction while escaping the arbitration clause when convenient.⁶ The question becomes: should law follow corporate form, or commercial substance?

C. The Question

On what legal basis, and subject to what limitations, may a non-signatory to an arbitration agreement be compelled to arbitrate or invoke the arbitration clause?

D. The Answer: Implied Consent Through Conduct

Indian law, following the Constitution Bench decision in Cox and Kings, recognises the Group of Companies Doctrine as a method for identifying the 'veritable parties' to an arbitration agreement. The doctrine does not impose arbitration on unwilling strangers based on corporate affiliation. Rather, it provides a framework for inferring consent from conduct. Where a non-signatory has actively participated in the negotiation, performance, or termination of a contract, and where all parties mutually intended the non-signatory to be bound, that entity may be treated as a party to the arbitration agreement despite the absence of its signature.

II. The Indian Framework: From Chloro Controls to Cox and Kings

A. The Flawed Foundation: Chloro Controls (2013)

For a decade, Indian law on non-signatories was governed by Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc.7 In that case, the Supreme Court confronted a dispute involving a foreign parent company and Indian distributors connected through multiple agreements. To bind non-signatories, the Court relied on the statutory phrase 'claiming through or under' in Section 45 of the Arbitration and Conciliation Act, 1996, reasoning that a non-signatory group company could be subjected to arbitration if it was an integral part of a 'composite transaction.'

Chloro Controls articulated eight factors to assess whether non-signatories should be bound, including: direct relationship to a signatory party; commonality of subject matter; composite nature of the transaction; a 'single economic reality' or 'tight group structure'; and participation in negotiations and performance.8 However, the judgment suffered from internal contradictions. It simultaneously asserted that non-signatories could be bound 'without prior consent' yet required 'mutual intention' among parties—a logical impossibility. More fundamentally, it conflated consensual theories (where parties actually agreed) with non-consensual theories (where liability is imposed regardless of agreement).

B. The Referral: Doubting the Logic

In 2022, a three-judge bench in Cox and Kings Ltd. v. SAP India Pvt. Ltd. questioned the legal basis of Chloro Controls.9 The bench observed that the earlier decision had prioritised 'economic efficiency' over sound legal principles. Crucially, they questioned whether the phrase 'claiming through or under' could genuinely accommodate the Group of Companies doctrine, which binds parties based on their own conduct rather than derivative rights. The matter was referred to a five-judge Constitution Bench.

C. The New Standard: Cox and Kings (2023)

The Constitution Bench, in a unanimous judgment delivered by Chief Justice D.Y. Chandrachud, authoritatively settled the law.10 The Court's holdings may be summarised as follows:

First, the phrase 'claiming through or under' in Sections 8, 35, and 45 of the Act refers only to entities acting in a derivative capacity—successors, assignees, subrogates who step into the shoes of an original signatory.11 It does not encompass group companies who are implicated due to their own independent conduct. Chloro Controls erred in tracing the doctrine to this phrase.

Second, the Group of Companies Doctrine has independent existence, rooted in the definition of 'party' under Section 2(1)(h) read with Section 7 of the Act.12 A non-signatory can be a 'party' in its own right if there is evidence of implied consent. The requirement that an arbitration agreement be 'in writing' does not mandate that all parties sign it; consent may be inferred from conduct.

Third, the doctrine is fundamentally consent-based. It must not be conflated with alter ego or piercing the corporate veil, which are non-consensual theories imposing liability regardless of agreement.13 Concepts such as 'tight group structure' and 'single economic unit' cannot alone justify binding non-signatories; there must be evidence of actual consent implied from conduct.

Fourth, the involvement must be 'positive, direct, and substantial.'14 Mere incidental involvement—a parent company providing minor logistical support—is insufficient. The non-signatory must have actively assumed obligations in the negotiation, performance, or termination of the contract.

III. The 'Veritable Party' Test: Determining Implied Consent

A. The Core Principle: Mutual Intention

The Group of Companies Doctrine, as reformulated in Cox and Kings, is a judicial method to identify the 'veritable' (true) parties to an arbitration agreement.15 The Court held that while a signature is the most profound expression of consent, it is not the only one. Consent can be implied from conduct, provided there is mutual intention among all parties—signatories and non-signatories alike—to bind the non-signatory to the arbitration agreement.

This formulation draws heavily from the original Dow Chemical v. Isover Saint Gobain award (1982),16 which held that non-signatories 'in accordance with the mutual intention of all parties to the proceedings, appear to have been veritable parties to these contracts.' The inquiry is bilateral: not only must the non-signatory have demonstrated willingness to be bound, but the signatories must have understood and accepted that the non-signatory was, for practical purposes, a party to the transaction.

B. The Cumulative Factors

To determine whether mutual intention exists, courts and tribunals must apply the factors endorsed by the Constitution Bench, originally articulated in Oil and Natural Gas Corporation Ltd. v. Discovery Enterprises Pvt. Ltd.17:

(i) The mutual intent of the parties;

(ii) The relationship of the non-signatory to a signatory party;

(iii) The commonality of subject matter;

(iv) The composite nature of the transaction; and

(v) The performance of the contract.

These factors must be assessed holistically, not mechanically. No single factor is determinative; the inquiry is whether, taken together, the circumstances demonstrate that the non-signatory consented to be bound.

C. Composite Transactions Explained

A 'composite transaction' refers to a commercial arrangement where multiple agreements are interlinked to achieve a single objective.18 The Supreme Court defines it using two criteria: first, interlinked purpose—the transaction involves a 'mother agreement' (principal contract) and several 'ancillary agreements'; second, interdependence—the performance of the principal agreement is not feasible without the aid, execution, and performance of the ancillary agreements.

Ameet Lalchand Shah v. Rishabh Enterprises19 provides an illustration. Four different agreements involving different parties were executed for a single purpose: constructing a 2 MWp solar plant. Three contained arbitration clauses; one did not. The Court held this was a composite transaction where all agreements were interconnected, permitting reference of all parties to arbitration under the main agreement's clause.

The significance for non-signatories is this: if a non-signatory is party to an ancillary agreement essential for the principal agreement's performance, courts may infer that all parties intended to resolve disputes together in a single forum, avoiding fragmentation of proceedings.

D. Conduct is Key: The Performance Factor

While a composite transaction provides context, the non-signatory's active participation provides evidence of consent. The Supreme Court emphasised that performance of the contract is the most important factor.20 The non-signatory must have actively assumed obligations and played a 'positive, direct, and substantial' role in the negotiation, performance, or termination of the contract.

This creates a 'veritable party' standard: the conduct must be strong enough to create a legitimate belief in the signatory that the non-signatory was, for all practical purposes, a party to the contract. The original Dow Chemical award exemplifies this—Dow Chemical France, though not a signatory, had 'played an essential role' by effectuating all deliveries under the contracts, participating in negotiations, and being involved in termination discussions.

E. Burden of Proof

The application of the doctrine is not automatic. The burden lies on the party seeking to join a non-signatory to prove these cumulative factors through objective evidence.21 General averments of a 'group structure' are insufficient; specific acts of positive, direct, and substantial involvement must be pleaded and proved. Conduct before, during, or after execution may be relevant.

IV. The Global Divide: Comparative Jurisprudence

The Group of Companies Doctrine remains polarising internationally. Understanding this divide is critical for cross-border transactions, as an award rendered in a 'pro-joinder' jurisdiction may face refusal of enforcement in a 'restrictive' jurisdiction.

A. France: The Doctrine's Birthplace

The doctrine originated in the 1982 ICC award in Dow Chemical v. Isover Saint Gobain.22 The tribunal held that 'irrespective of the distinct juridical identity of each of its members, a group of companies constitutes one and the same economic reality of which the arbitral tribunal should take account.' Non-signatories who, 'in accordance with the mutual intention of all parties,' appeared to be 'veritable parties' could be bound.

French law has since developed a two-part test: the non-signatory must have knowledge of the arbitration agreement and must have demonstrated implied consent through involvement in negotiation, performance, or termination.23 The Paris Court of Appeal has repeatedly upheld this approach, emphasising that mere group membership is insufficient—explicit or implicit intention is required.

B. The United Kingdom: Firm Rejection

English courts have explicitly rejected the doctrine. In Peterson Farms Inc. v. C&M Farming Ltd (2004),24 the High Court set aside an ICC award that had bound non-signatories, ruling that the doctrine 'forms no part of English law' and that corporate separateness must be respected unless specific agency or veil-piercing criteria are met.

In Dallah Real Estate and Tourism Holding Co. v. Ministry of Religious Affairs, Government of Pakistan (2010),25 the UK Supreme Court refused enforcement of a French ICC award against Pakistan, which had not signed the agreement. Even applying French law (the law of the seat), the Court found no common intention for Pakistan to be bound. This case starkly demonstrates the enforcement risk when jurisdictions diverge.

C. Singapore: Anathema to Consent

Singapore has adopted a similar stance. In Manuchar Steel Hong Kong Ltd. v. Star Pacific Line Pte Ltd (2014),26 the High Court rejected the 'single economic entity' concept as 'not recognised' in Singapore law, noting its 'striking similarity' with the Group of Companies doctrine. The Court held that binding non-parties would be 'anathema to the internal logic of the consensual basis of an agreement to arbitrate.'

D. The United States: Equitable Estoppel

US courts do not recognise the Group of Companies Doctrine by name but achieve similar results through equitable estoppel. In GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC (2020),27 the Supreme Court unanimously held that the New York Convention does not preclude domestic equitable doctrines for binding non-signatories.

Two forms exist: direct benefits estoppel (a party seeking contract benefits must accept the arbitration obligation) and intertwined claims estoppel (where claims are 'intimately founded in and intertwined' with the underlying contract).28 This approach focuses on preventing parties from 'cherry-picking' contract benefits while avoiding arbitration obligations.

E. Switzerland: Conditional Acceptance

Swiss law explicitly rejects the Group of Companies Doctrine as a standalone basis.29 The Swiss Federal Supreme Court has held that 'the mere fact that one entity might control another cannot, in and of itself, lead to the reversal of the presumption according to which only the entity that has entered into an arbitration agreement is bound by it.' However, extension is permitted where the non-signatory's conduct demonstrates willingness to be bound or where corporate veil piercing is justified.

F. Summary: The Global Position

Jurisdiction	Position	Key Requirement
India	Accepts	Implied consent; positive, direct, substantial involvement
France	Accepts	Knowledge of clause; involvement in performance
UK	Rejects	Express consent; strict privity; agency/veil-piercing only
Singapore	Rejects	Express consent; 'anathema' to bind non-parties
USA	Via Estoppel	Direct benefit from contract; intertwined claims
Switzerland	Conditional	Specific interference in performance; good faith conduct

V. Practical Implications: Procedure, Drafting, and Enforcement

A. Procedural Framework: Who Decides and When?

A critical procedural shift post-Cox and Kings is the limitation of judicial intervention at the pre-arbitration stage. Courts acting under Section 8 (referral to arbitration) or Section 11 (appointment of arbitrators) must not conduct detailed evidentiary inquiries into whether a non-signatory is bound. The referral court should determine only the prima facie existence of an arbitration agreement.30

The complex factual determination of whether a non-signatory is a 'veritable party' based on the Discovery Enterprises factors is now firmly within the domain of the Arbitral Tribunal under Section 16 (Kompetenz-Kompetenz). This preserves party autonomy and prevents dilatory tactics at the referral stage.

A practical gap remains regarding interim relief under Section 9. While non-signatories bound under the doctrine can apply for interim measures, this is effectively available only after the tribunal determines they are parties.31 This creates difficulty for claimants seeking urgent relief against non-signatory parent companies before the tribunal is constituted.

B. Evidentiary Burden

The burden of proof lies on the party seeking to implead a non-signatory. Practitioners must plead specific acts of positive, direct, and substantial involvement—not merely general averments of group structure. Evidence should demonstrate:

(i) The non-signatory's role in negotiation (correspondence, meeting participation, term-sheet discussions);

(ii) The non-signatory's role in performance (deliveries made, services rendered, payments received);

(iii) The non-signatory's role in termination or dispute (correspondence, settlement discussions);

(iv) Evidence of mutual understanding that the non-signatory was a party (communications, industry practice).

Practitioners must distinguish between incidental support (which does not bind) and active assumption of obligations (which does). Common directorships or financial links alone are insufficient.

C. Drafting Strategies

Since the doctrine relies on implied consent, parties can regain control through express provisions.

To exclude non-signatories: (i) Define 'Parties' explicitly to exclude affiliates, subsidiaries, and parent companies; (ii) Include 'no third-party rights' clauses excluding obligations of non-signatories; (iii) If a parent provides support, use a separate Service Level Agreement with a distinct dispute resolution mechanism to avoid the composite transaction inference.

To include non-signatories: (i) Obtain a specific joinder agreement from the desired party; (ii) Use a guarantee deed with express arbitration submission; (iii) Define 'Parties' to include affiliates performing obligations. Do not rely on the unpredictable application of the doctrine when certainty is required.

D. Enforcement Risks

While Cox and Kings aligns India with pro-joinder jurisdictions like France, it creates friction with strict jurisdictions. An award binding a non-signatory under the Group of Companies doctrine may be valid in India but refused enforcement in the UK or Singapore under Article V(1)(a) of the New York Convention (invalidity of agreement as to the non-signatory).³²

Dallah v. Pakistan and Sarhank Group v. Oracle Corp.³³ demonstrate this risk: awards binding non-signatories under implied consent theories were refused enforcement in jurisdictions requiring express consent. Practitioners must carefully consider the location of the non-signatory's assets before relying on the doctrine. If assets are in London or Singapore, obtaining express consent or a guarantee may be essential.

The Group of Companies Doctrine, as settled by Cox and Kings, represents Indian arbitration law's mature response to the challenge of corporate groups in commercial transactions. The doctrine is not a licence to impose arbitration on unwilling strangers based on corporate affiliation. It is, rather, a principled method for identifying those who have genuinely consented to arbitrate—even without signing—through their active participation in the commercial venture.

The practical implications are significant. For claimants seeking to bind non-signatories, the evidentiary burden is substantial: they must demonstrate positive, direct, and substantial involvement creating mutual intention to be bound. For parties structuring transactions, explicit drafting can either include or exclude non-signatories with certainty. For all practitioners, the global divide—with the UK and Singapore rejecting what India and France accept—creates enforcement risks that must inform strategic choices about seat, governing law, and asset location.

The law now recognises what commercial reality has long demonstrated: that signatures are not the only evidence of consent, and that corporate structures should not be permitted to defeat legitimate expectations. Cox and Kings achieves this recognition while preserving the foundational principle that arbitration remains a creature of consent—consent that may be implied from conduct, but consent nonetheless.

Author is a California and India-qualified attorney, and a Certified Fraud Examiner, Anti-Money Laundering Specialist, and E-Discovery Specialist.

Views expressed are personal.

Endnotes

¹Coxand Kings Ltd. v. SAP India Pvt. Ltd., 2023 INSC 1051; (December 6, 2023), Constitution Bench of five judges headed by Chief Justice D.Y. Chandrachud.

² Gary Born, International Commercial Arbitration (3rd ed., Kluwer 2021), Chapter 1 ('Arbitration exists only by virtue of an agreement between the parties').

³ Arbitration and Conciliation Act, 1996, Section 7(3)-(4) (requiring arbitration agreements to be 'in writing').

⁴ Salomon v. Salomon & Co. Ltd. [1897] AC 22 (HL) (establishing separate legal personality of corporations).

⁵ Cox and Kings (n 1) at para 154 ('The phenomenon of group companies is the modern reality of economic life and business organisation').

⁶ Bernard Hanotiau, Complex Arbitrations: Multiparty, Multi-contract, Multi-issue (2nd ed., Kluwer 2020), Chapter 4.

⁷ Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641.

⁸ Chloro Controls (n 7) at paras 68-75 (articulating the eight-factor test).

⁹ Cox and Kings Ltd. v. SAP India Pvt. Ltd., (2022) 8 SCC 1 (referral order questioning Chloro Controls).

¹⁰ Cox and Kings (n 1) (Constitution Bench judgment).

¹¹ Cox and Kings (n 1) at paras 90-102 (holding that 'claiming through or under' refers only to derivative claimants such as successors, assignees, and subrogates).

¹² Cox and Kings (n 1) at paras 103-120 (holding the doctrine has independent existence under Section 2(1)(h) read with Section 7).

¹³ Cox and Kings (n 1) at paras 150-165 (distinguishing consent-based theories from alter ego and veil-piercing).

¹⁴ Cox and Kings (n 1) at para 168 ('The involvement of the non-signatory must be positive, direct, and substantial... mere incidental involvement is insufficient').

¹⁵ Cox and Kings (n 1) at para 175.

¹⁶ Dow Chemical v. Isover Saint Gobain, ICC Case No. 4131, Interim Award (23 September 1982), published in Yearbook Commercial Arbitration, Vol. IX (1984) at 131.

¹⁷ Oil and Natural Gas Corporation Ltd. v. Discovery Enterprises Pvt. Ltd., (2022) 8 SCC 42.

¹⁸ Cox and Kings (n 1) at paras 130-145 (explaining composite transactions).

¹⁹ Ameet Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678.

²⁰ Cox and Kings (n 1) at para 168.

²¹ Cox and Kings (n 1) at para 195 ('The burden is on the party seeking joinder of the non-signatory to prove... based on objective evidence').

²² Dow Chemical (n 16).

²³ French Court of Cassation, 1st Civil Chamber, 27 March 2007, No. 04-20.842 ('The effect of the international arbitration clause extends to the parties directly involved in the performance of the contract').

²⁴ Peterson Farms Inc. v. C&M Farming Ltd [2004] EWHC 121 (Comm).

²⁵ Dallah Real Estate and Tourism Holding Co. v. Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46.

²⁶ Manuchar Steel Hong Kong Ltd. v. Star Pacific Line Pte Ltd [2014] SGHC 181.

²⁷ GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, 590 U.S. 432 (2020).

²⁸ See Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (discussing equitable estoppel theories).

²⁹ Swiss Federal Supreme Court, ATF 129 III 727 (2003).

³⁰ Cox and Kings (n 1) at paras 180-190; Vidya Drolia v. Durga Trading Corporation, (2020) 5 SCC 1.

³¹ Cox and Kings (n 1) at para 185 (discussing Section 9 interim measures).

³² New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), Article V(1)(a).

³³ Sarhank Group v. Oracle Corp., 404 F.3d 657 (2d Cir. 2005) (refusing to enforce award against parent company bound under Egyptian law's Group of Companies theory).