In Cox and Kings Ltd. v. SAP India Private Ltd., the hon’ble Supreme Court of India (Supreme Court) upheld the applicability of the doctrine of group of companies (Doctrine) in the context of complex transactions involving multiple parties and agreements in the Indian arbitration jurisprudence.


Supreme Court recognized the practicality of modern commercial transactions, where the entity signing a contract with an arbitration clause may not always be the one negotiating or performing the contractual obligations. In alignment with these commercial realities, the Supreme Court underscored that the Doctrine’s application is rooted in determining the common intention of parties in a commercial agreement, binding the non-signatory party to the arbitration agreement while preserving the corporate separateness of group companies.


Additionally, the Supreme Court noted that the Doctrine stands independently as a legal principle, deriving from a harmonious interpretation of the definitions of “party” and “arbitration agreement” under the Arbitration and Conciliation Act, 1996. It rejected the approach taken in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.  that traced the Doctrine to the authority of a judicial body to refer parties to an arbitration agreement as well as parties “claiming through or under him”, deeming it erroneous and conflicting with established principles of contract and commercial law.

Regarding the application of the Doctrine, the Supreme Court emphasized assessing factors cumulatively, including the mutual intent of the parties, the relationship between a non-signatory and a signatory, the commonality of the subject matter, the composite nature of transactions, and contract performance to ascertain whether a company within a group of companies which is not a signatory to arbitration agreement would nonetheless be bound by it.


The Supreme Court further held that, especially in applications for the appointment of arbitrators or reference to arbitration, courts should defer the issue as regards the applicability of Doctrine to be determined by the arbitral tribunal.


The above judgment is an important development for the applicability of the Doctrine in multi-contract and multi-party arbitrations and must be taken into consideration as part of the overall risk assessment while negotiating, structuring, and performing complex multi-party contracts.