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Can A Third Party Which Is Not Party To The Arbitration Agreement Participate In Arbitration Proceedings? 

By - KSANDK on October 6, 2022

A third party to an arbitration is a non-signatory party with no direct association with the agreement. As per several judgements by Indian judicial authorities, they are neither considered necessary or proper parties to initiate proceedings nor are they bound by the contract [1].

However, through the discretionary power of the arbitral tribunal, depending on the details of the case, a third party may be entitled to interim measures under Section 9 of the Arbitration and Conciliation Act, 1996 (‘Act’). This impleading is based on proximity with the subject matter or party to an arbitration agreement and is only done to render a complete adjudication.   

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A third party cannot seek direct relief under Section 9 since it doesn’t have a locus standi to do so, however, the parties to the agreement can seek relief against the third party.   

There are a few cases wherein a third party can become a party to the arbitration-  

1. Joinder to a multi-party arbitration:

If there is a relationship between the third party and the signatory to the agreement and there is sufficient cause for the judicial authority to believe that a party qualifies as “a person claiming through or under” [2] a party to the agreement, the party would be allowed to join the arbitral proceedings during ongoing or pending proceedings.   

2. Group of Companies doctrine:

This doctrine is based on the principle of implied consent and the parties' intention to bind an entity to the arbitration proceeding as they may form part of the same group of companies as the signatories of the arbitration agreement. Though not expressly mentioned, it finds its scope in Indian law through Section 8 of the Act through the phrase “a person claiming through or under” [3] a party. The application of this doctrine helps avoid the multiplicity of disputes in multi-party contracts and scenarios.   

3. Intervention or consolidation:

Intervention is when a third party can seek to join the arbitral proceedings on its motion, before the commencement or after the commencement of the proceedings without the request of the original parties. Consolidation may be done by the arbitral tribunal if two or more claimants are initiating a single proceeding against the same respondent by jointly filing a single request for arbitration. The consolidation is done based on balanced conditions such as congruous arbitration agreements and the similarity of the identity of parties. Though these two methods are not expressly recognized in India, they are identified in international arbitration.   

The proximity of the third party to the original parties of the arbitration agreement and their importance to the case helps determine their participation in the arbitration proceeding. They do not get the same rights or bear the same liabilities as the signatories owing to the nature of their involvement. Over the years, Indian law has evolved through recognition of international principles of arbitration such as the ‘group of companies doctrine’ during proceedings, but there is yet to be a singular stance on the position of non-signatory party or a third party.   

  1. Firm Ashok Traders Vs. Gurumukh Das Saluja and Other [(2004) SCC 155] & Jagdish Chandar Vs. Ramesh Chandar [(2007) 5 SCC 719] 
  2. Section 8 of the Arbitration and Conciliation act 1996 
  3. Ibid. 

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