Permitting a Stranger to Attend Is Charting a Course Unknown to Law: Supreme Court Bars Non-Signatories from Arbitration

“Confidentiality of Arbitral Proceedings Is Sacrosanct – Section 42A Cannot Be Breached”, Supreme Court of India delivered a significant pronouncement arising from SLP (C) Nos. 4775–4779 of 2025. A Bench comprising Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar emphatically held that non-signatories to an arbitration agreement have no right to be present or intervene in arbitral proceedings.

Setting aside the Delhi High Court’s order which had permitted Rahul Gupta (RG) and his companies—none of whom were signatories to the family settlement deed—to attend arbitral hearings, the Court declared such directions “without jurisdiction, beyond the scope of the Arbitration Act, and a breach of arbitral confidentiality.”

The controversy stemmed from a family settlement (MoU/FSD) dated 09.07.2019, entered into between members of the Gupta family. While Pawan Gupta and Kamal Gupta were signatories, Rahul Gupta—the son of Kamal Gupta—was not.

When disputes arose, proceedings under Section 11(6) of the Arbitration and Conciliation Act, 1996 were filed for appointment of an arbitrator. Rahul Gupta sought to intervene but was refused on 22.03.2024, when a retired Supreme Court judge was appointed as sole arbitrator.

Yet, months later, Rahul Gupta and several companies moved fresh applications in the disposed-of Section 11 proceedings, seeking permission to remain present in arbitration, access pleadings and orders, and even protection of their property interests. The Delhi High Court, by orders dated 07.08.2024 and 12.11.2024, astonishingly permitted non-signatories to attend the arbitral proceedings and recognised some of their rights.

This led the aggrieved parties to approach the Supreme Court.

The Supreme Court began with a stark reminder of first principles. Justice Chandurkar, writing for the Bench, framed the core question: “Whether it is permissible for a non-signatory to an agreement leading to arbitration proceedings to remain present in such arbitration proceedings?”

Answering with categorical clarity, the Court held: “A non-signatory to the MoU/FSD would be a stranger to such arbitration proceedings. Permitting a stranger to remain present in the arbitration proceedings especially when the award to be passed would not be binding on such stranger would be charting a course unknown to law.”

Referring to Section 35, the Bench observed that arbitral awards bind only the parties and those claiming under them. Since Rahul Gupta and his companies were neither, their presence in proceedings had “no legal basis whatsoever.”

On confidentiality, the Court invoked Section 42A of the Act, noting: “Permitting a stranger to the arbitration proceedings to remain present and observe the said proceedings would result in breach of the provisions of Section 42A of the Act.”

The Court was equally stern on jurisdiction. It held that after appointment of the arbitrator on 22.03.2024, the High Court became functus officio: “The sole arbitrator having been appointed under Section 11(6) of the Act… the Court did not have any further jurisdiction to entertain a fresh application with a prayer for permission to remain present in the arbitration proceedings.”

Even assuming that the intervenors feared prejudice, the Court stressed that such apprehension could not justify bending the statutory framework: “The Act does not envisage an observer in arbitral proceedings… The direction, even if well-intentioned, does not have any statutory support.”

Finally, reiterating Section 5’s mandate of minimal judicial intervention, the Court held that use of Section 151 CPC to reopen concluded arbitration-related proceedings was impermissible and amounted to abuse of process.

In a decisive conclusion, the Bench declared: “The attempt on their behalf to re-open the proceedings amounted to an abuse of the process of law. The applications deserved outright rejection. The learned Judge erred in entertaining the same on merits.”

Accordingly, the order of 12.11.2024 was set aside, the appeals allowed, and costs of ₹3,00,000 imposed on the respondents, payable to the Supreme Court Advocates On-Record Association within two weeks.

This ruling reaffirms the party-centric nature of arbitration and fortifies its confidentiality and autonomy. By declaring that courts become functus officio after appointing arbitrators and cannot re-open concluded matters, the judgment underscores the principle that arbitration under the 1996 Act is a self-contained code, where judicial intervention is the exception, not the rule.

Most significantly, the Supreme Court has drawn a clear line: “Non-signatories cannot be permitted to attend arbitral proceedings. To allow it would be to chart a course unknown to law.”

Date of Decision: 13 August 2025