MP HC: non-signatories can't be referred to arbitration absent proof they are 'veritable parties' to the pact

Deciding an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator, the Madhya Pradesh High Court's Indore Bench held that two of the three respondents, who had not signed the underlying agreement, could not be referred to arbitration along with the signatory respondent. The applicant, SAM Industries Ltd, sought arbitration of a land-related dispute against Mahesh and two others, contending all three were bound by the arbitration clause. Justice Vinay Saraf applied the test drawn from the Supreme Court's ruling in Hindustan Petroleum Corporation Ltd (on when a non-signatory can be treated as a 'veritable party' to an arbitration agreement), and examined the material on record, including a mediation notice sent before the dispute, which made no mention of the two non-signatory respondents' involvement in the transaction.

Finding no material to show they were parties to, or directly involved in performing, the agreement, the Court held there was no privity of contract binding them, and that non-signatories cannot be compelled into arbitration merely because they are connected to the same transaction. The application was allowed only as between the applicant and the signatory respondent, and a former Supreme Court judge was proposed to be appointed as sole arbitrator for that dispute. This is a Madhya Pradesh High Court ruling, binding within that State, not a Supreme Court precedent.