Kamal Gupta & Anr. v. L.R. Builders Pvt. Ltd. & Anr.
Court – Supreme Court
Citation – 2025 INSC 975
Date – 13.08.2025
The Hon’ble Supreme Court has held that non-signatories to an arbitration agreement cannot be allowed to participate in arbitration proceedings as it waters down the concept of confidentiality.
The Court held,
“13. Once it is clear that the arbitral award would not bind non-parties to the said MoU/FSD as such parties were not signatories to the said documents, there would be no legal basis whatsoever to permit a non-signatory to the MoU/FSD to remain present in the proceedings before the sole arbitrator. When the arbitration proceedings can take place only between parties to an arbitration agreement and Section 35 of the Act does not make the arbitral award to be passed binding on non-signatories to such agreement, we do not find any legal right conferred by the Act that would enable a non-party to the agreement to remain present in arbitration proceedings between signatories to the agreement. It is not the case of any of the parties to the MoU/FSD that RG and the intervenors were claiming through any of them in the context of Section 35 of the Act. The parties to the agreement being bound by the terms of the agreement and the sole arbitrator being required to resolve the disputes between parties to the agreement, a non-signatory to the agreement would be a stranger to such arbitration proceedings. Permitting a stranger to remain present in the arbitration proceedings especially when the award to be passed would not be binding on such stranger would be charting a course unknown to law. The remedy, if any, to a party who is not a signatory to the agreement is available under Section 36 of the Act if such award is sought to be enforced against him.
14. At this stage, it is necessary to refer to the provisions of Section 42A of the Act. The arbitrator, the arbitral institution and the parties to the arbitration agreement have to maintain confidentiality of all arbitral proceedings. The legislative intent behind maintaining confidentiality of information is quite clear. Permitting a stranger to the arbitration proceedings to remain present and observe the said proceedings would result in breach of the provisions of Section 42A of the Act. Even on this count the impugned order cannot be sustained.”
— Team AMLEGALS
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