Arbitration – Section 11 of the AA – Directors, who are not party to the Arbitration Agreements cannot be made party – SC Judgment in Cox and Kings Ltd case is distinguished.

Respondent No.1 had entered into two Builder Buyer Agreements dated 18.11.2016 and 8.2.2017 with the Petitioner in respect of Residential Township “RLF City” at Salarpur District Alwar Rajasthan.

Respondent Nos.2 and 3 are the Directors and authorised representatives of the Respondent No.1.  In this capacity, Respondent No.2 had signed the agreements on behalf of Respondent No.1 bu they are not party to the Arbitration Agreements.

In view of the disputes between the parties, the petitioner invoked the arbitration clause of the agreements and thereafter, filed section 11 petition since there was no response.

Respondent Nos.2 and 3 although non-signatories are added as parties applying the doctrine of “Group of Companies” in Cox and Kings Ltd case decided by the Supreme Court.  Moreover, “parties” under Section 2(1) read with Section 7 of the AA include both signatories and non-signatories.

HELD that the relation of Respondent No.1 with the Respondent Nos.2 and 3 is that of Principal and Agent as specified under Section 182 of the Contract Act, 1872 and no intention to bind a non-signatory to the agreement between the parties can be discerned and reliance placed on Cox and Kings Ltd is respectfully distinguished.  Referring to Section 230 of the Contract Act, it was seen that subject to the contract to the contrary, an agent cannot be held liable for the acts of a known principal.  Therefore, Respondent Nos.2 and 3 cannot be made parties to the arbitration.

Judgment dated 24.1.2024 in Arb.P.No.667 of 2023 of Vingro Developers Pvt Ltd Vs. Nitya Shree Developers Pvt Ltd.