Citation: Hemant D. Shah HUF & Anr. v. Chittaranjan D. Shah HUF & Ors., 2026 INSC 1111
A person who has not signed the arbitration agreement can still be a “veritable party” to the arbitration if the dispute is about the same asset and its outcome would directly affect his own rights, such as where his title depends on the validity of the document challenged in the arbitration. At the Section 11 stage, the court only gives a prima facie view, and the arbitral tribunal makes the final decision on whether the non-signatory is bound, as well as on questions such as limitation and estoppel.
The Supreme Court has held that two persons who did not sign a partnership deed with an arbitration clause can still be made parties to the arbitration over a Worli property, because the outcome of the dispute directly decides their own rights.
The dispute concerns a 3,500 sq. ft. ground-floor unit in Manish Commercial Centre, Worli, Mumbai, bought in 1977 by a partnership firm, M/s Prospective Traders. In a 1985 deed, the appellants (Hemant D. Shah HUF and the wife of Hemant D. Shah) and the first two respondents (Chittaranjan D. Shah HUF and a daughter-in-law of C.D. Shah) joined the firm. The appellants say they never retired and the partnership continues. The respondents rely on a retirement deed of 1995, which the appellants call a forgery, followed by later deeds, under which the firm became a proprietorship of the first respondent. In 2009, the first respondent inducted the third and fourth respondents, who then continued as partners in a new firm. When the appellants asked for an arbitrator under Section 11 of the Arbitration Act, the High Court appointed one against the first two respondents, held that the limitation question was in the appellants’ favour, but refused to join the third and fourth respondents because they were not signatories to the 1985 deed and did not fall within the “claiming through or under” or Group of Companies exceptions. Justices J.B. Pardiwala and K. Vinod Chandran modified this. They noted that an arbitration clause cannot rigidly exclude persons who, by conduct and relationship, are not strangers to the dispute, citing the Cox & Kings and Hindustan Petroleum rulings. They said that if the 1995 retirement deed is found invalid, the parties would go back to the 1985 partnership, and the third and fourth respondents’ own partnership deed, which can be valid only if the retirement is valid, would be affected. Since the dispute is about ownership of the same property, they held that the third and fourth respondents are “veritable parties”. The court stressed that this is only a prima facie finding, and that limitation and the plea of estoppel, because they were not included in an earlier arbitration, remain open to be decided by the arbitral tribunal.