This appeal was against a judgment passed by the High Court of Judicature at Bombay in a commercial arbitration application whereby the Section 11(4)-Application filed under the Arbitration and Conciliation Act, 1996 of the respondent-BCL Secure Premises Pvt. Ltd. was allowed and an arbitrator was appointed to adjudicate upon the disputes and differences between the parties.

A 2-Judges Bench of the Supreme Court held –

“24. The scope of jurisdiction of the referral court hearing a Section 11-Petition when faced with an issue of joinder of a non-signatory to the arbitration agreement has been lucidly set out by the five-judge Bench of this Court in Cox and Kings Limited vs. Sap India Private Limited and Another [(2024) 4 SCC 1]”

and further –

“…the referral court should be prima facie satisfied that there exists an arbitration agreement and as to whether the non-signatory is a veritable party. It further holds that even if the referral court prima facie arrives at the satisfaction that the non signatory is a veritable party, the Arbitral Tribunal is not denuded of its jurisdiction to decide whether the non signatory is indeed a party to the arbitration agreement on the basis of factual evidence and application of legal doctrine. The Court further reinforces this proposition by holding that as to whether the non-signatory is bound would be for the Arbitral Tribunal to decide.

26. But what is primordial is that it should be demonstrated prima facie before the referral court that the non-signatory is a veritable party. According to the “Illustrated Oxford Dictionary (Revised Edition 2003)” the word:

“veritable” means “real; rightly so called”

(a veritable feast)”,

In substance, it means truly, genuinely or for all intended purposes. The referral court under Section 11 is not deprived of its jurisdiction from examining whether the non-signatory is in the real sense a party to the arbitration agreement. The answer thereof will depend on the facts and circumstances of each case after examining the documents pertaining thereto.”.

The Bench further held –

“35. This does not mean that where the Referral Court finds prima facie a party is not a veritable party still the matter is left to the Arbitral Tribunal. To hold so, would relegate the Referral Court to the status of a monotonous automation. Further, to countenance such an extreme proposition would lead to disastrous consequences, where absolute strangers could walk into the Referral Court and contend that the matter has to perforce go to the Arbitral Tribunal for a decision on the veritable nature of the party. We are not prepared to accept such an extreme proposition.

36. It could happen that one party having undertaken a contract from the other may engage one or more third parties like in the present case. In such a scenario, if there is nothing even prima facie to show that there was any semblance of an intent to effect legal relationship between that party and the party originally granting the contract and/or to indicate that such a third party was a veritable party, such parties cannot be found to be veritable parties.”.

The Bench held that the respondent had not established its case to show even prima facie the existence of an arbitration agreement between HPCL and the respondent and that the respondent was a veritable party. The appeal was allowed and the judgment of the Bombay High Court was set aside.