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  • Aamir Kapadia, Shivam Yadav

The Group of Companies Doctrine: Has The Dust Settled?

[Aamir and Shivam are students at Jindal Global Law School.]

On 6 December 2023, the Supreme Court of India pronounced its judgment in Cox and Kings Limited v. SAP India Private Limited (Cox-II), concerning the legality of the group of companies doctrine (GoCD) under the Arbitration and Conciliation Act 1996 (ACA). The GoCD provides that an arbitration agreement entered into by a company within a ‘group of companies’ may bind non-signatory affiliates as well, provided that it was in accordance with the mutual intention of the parties. While the judgement strengthens the ethos of arbitration in India by aiming to reduce the multiplicity of litigation, it also raises certain concerns.

Legal Background

The GoCD originated in the interim award in Dow Chemical France v. ISOVER Saint Gobain, where non-signatory companies that were a part of the same group of companies as signatories were also impleaded following the mutual intent of the parties. This intention was evidenced through the active role of the non-signatories during “the conclusion, performance, or termination of the contracts”. For the tribunal, establishing mutual intent required something more than mere membership of a common group of companies.

GoCD first found approval in India in Chloro Controls India (Private) Limited v. Severn Trent Water Purification Inc. (Chloro). The court in Chloro ruled that the phrase “any person claiming through or under” in Section 45 allowed for the inclusion of non-signatories to arbitration agreements. Affirming GoCD, the court emphasised that its application was predicated on the mutual intent of the parties. Accordingly, it laid down 4 factors that would facilitate the determination of the parties’ common intent viz. the (i) direct relationship between signatories and non-signatories, (ii) direct commonality of subject-matter, (iii) composite nature of the transaction, and (iv) interests of justice.

In MTNL Limited v. Canara Bank (Canara Bank), while the court followed the factors in Chloro to demonstrate mutual intent to implead a non-signatory, it also noted that GoCD was applicable where there is a tight group structure with strong organizational and financial links, so as to constitute a single economic unit”. In ONGC Limited v. Discovery Enterprises Private Limited (Discovery Enterprises), the court further refined the factors mentioned in Chloro to determine the mutual intent of the parties, adding the ‘performance of the contract’ as an additional factor.

However, in Cox and Kings Limited v. SAP India Private Limited (Cox-I), the majority opinion criticized the application of the GoCD as infringing the principle of separate legal personality of corporate entities. Additionally, the majority believed that the doctrine contradicted the most crucial principle of arbitration – the idea of party consent.

The Judgment

The court noted that the principles of party autonomy and consent form the bedrock of the arbitral process, holding an arbitration agreement – being a creature of contract – must satisfy the requirements under the Indian Contract Act 1872, as well as the stipulations of the ACA under Section 7. Therefore, an arbitration agreement would also be bound by the doctrine of privity, i.e., that contractual rights or liabilities cannot be conferred on, or enforced by, non-parties to contracts, per MC Chacko v. State Bank of Travancore.

Though the general method to determine the parties to an arbitration agreement is to look at the signatories of the agreement, this would not be conclusive as Section 7 of the ACA does not require the signature of parties. There could arise circumstances wherein entities who are not formal signatories to the arbitration agreement may intend to be bound by it through their acts or conduct. Therefore, similar to the amended Article 7 of the UNCITRAL Model Law (Model Law), the requirement for arbitration agreements to be in writing is only to ensure a record of the parties’ consent, and not to identify them. The court acknowledged that while the amended Model Law was not adopted in India, it reflects “modern commercial reality” where precedence is given to substance over form, and contracts are interpreted in an efficacious manner.  

The majority held that the “phenomenon of group companies” is the “modern reality” of economic life, and is used for myriad purposes. They also noted instances wherein corporate entities deliberately exclude themselves from the arbitration agreement, but play an active role in the negotiation, performance, and termination of the contract, making the counterparty believe that it is a “veritable party” to the contract.

Nevertheless, group companies are governed by the principle of separate legal personality, as held in Vodafone International Holding BV v. Union of India. Though there may be situations wherein the parent may exercise such pervasive control over its subsidiary as to permit the piercing of the corporate veil, GoCD is premised on maintaining corporate separateness. Instead of piercing the veil, GoCD examines the common intention of the parties to bind non-signatories to the arbitration agreement, and is similar to consent-based doctrines such as agency and assumption.

The GoCD cumulatively requires the existence of a corporate group, and the determination of the mutual intention of the parties to bind non-signatories to the arbitration agreement (distinct from the substantive contract) through a holistic application of the factors highlighted in Discovery Enterprises. Though, the referring court should leave it to the arbitral tribunal to decide whether a non-signatory is a party to the arbitration agreement on the merits of the case. However, the mere presence of a commercial relationship between a signatory and non-signatory such that it forms a ‘single economic entity’ cannot be used as a sole basis to invoke GoCD, and to this extent, the court overturned Canara Bank.

Ultimately, the court opined that where the GoCD is applicable, non-signatories would be considered “parties” to the arbitration agreement in line with the common intention of the signatories and non-signatories. It held that the approach adopted in Chloro –  that GoCD finds genesis in “any person claiming through or under” – was erroneous, as such persons assert rights merely in “an inferior or subordinate position”, as successors-in-interest, to the signatory party.


The court’s decision to recognise non-signatories as “parties” to the arbitration agreement based on implied consent is a welcome move. First, such an approach fixes many long-standing anomalies. The approach in Chloro was based on a fundamental misapplication of GoCD. Non-signatories impleaded in the arbitral proceedings through GoCD do not derive their rights from the signatories; rather, they are parties in their own right owing to the mutual intention of both signatories and non-signatories.

Further, as noted in Cox-I, the application of GoCD in Chloro led to a non-signatory being bound by the arbitration agreement but unable to move the court for interim relief under Section 9. Cox-II fixes this by making non-signatories “parties” with the same rights as signatories to seek interim relief. Additionally, Cox-II does not preclude the addition of non-signatories through other consent-based doctrines, enabling the law to evolve parties.

Second, though laudable, certain aspects of Cox-II’s reasoning raise concerns. It must be emphasised that the court’s approach to upholding GoCD is practical but is rooted more in modern business sensibilities than strict legal reasoning. For example, the court’s reliance on the amended Article 7 of the Model Law was unjustified. After the 2006 amendment, Article 7 provided states with 2 options for adoption: the first is a comprehensive option allowing for the inclusion of non-signatories as parties through implied consent, whereas the second does not provide for non-signatory inclusion and merely states that arbitration agreements must be written. The court elected to rely on the former, even though Parliament has not amended Section 7 (which does not fully mirror the first option) or Section 2(1)(h) of the ACA despite the 2006 amendment to the Model Law, indicating the court’s deviation from legislative intent.

Finally, while the judgment obviates the issue of non-access to interim measures under Section 9, the issue persists for persons “claiming through or under” a party to the agreement. Such persons are successors-in-right to an original party arising as a result of inter alia subrogation, assignment, and succession. However, despite being legitimate successors-in-rights, while such persons are bound by the arbitration agreement and final awards, they are nevertheless deprived of the right to move the court to seek interim relief, for no apparent reason. However, due to the court’s limited interpretative powers, it is suggested that Parliament adopt the recommendations enumerated in the 246th report of the Law Commission of India and amend the definition of a ‘party’ under Section 2(1)(h) to include, within its ambit, persons “claiming through or under” parties to arbitration agreements.


In a positive development, the status of the GoCD in Indian arbitral jurisprudence has been finally settled by the Supreme Court. The judgment is a welcome step that rectifies prior missteps. However, to further strengthen the ethos of arbitration in India, it is important to address the concerns that remain even after the judgment. These include, most pertinently, the interests of successors-in-rights to parties, who are still left without access to interim relief from courts even after Cox-II. This just goes to show that judicial initiative is not sufficient and the legislature also has to step up and fill in the legal lacunae by adopting the recommendations of the Law Commission of India to broaden the definition of ‘party’ in Indian arbitral jurisprudence.

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