The judgment of the Hon’ble Delhi High Court in the case of Moneywise Financial Services v/s Dilip Jain; ARB.P. 702 of 2023 revolves around the crucial issue of whether a non-signatory guarantor can be impleaded as a party to arbitration proceedings. The crux of the matter lies in determining whether parties who have not directly signed the arbitration agreement but are connected to the underlying transaction can be brought into the arbitration process.
In this case, Moneywise Financial Services (Petitioner) issued a loan recall notice invoking arbitration due to the failure of the Respondent to pay outstanding dues. The key contention arose when the Petitioner sought to include Respondent Nos. 3 to 5, who were Guarantors but not signatories to the Loan Agreement, as parties to the arbitration. The Respondents argued that only signatories to the arbitration agreement could be part of the proceedings.
The Hon’ble Court, in the judgement, highlighted the importance of differentiating between signatory and non-signatory parties in arbitration agreements. The Court while referencing the judgment in Cox & Kings Ltd. v/s SAP India (P) Ltd., emphasized the need to consider the intentions and conduct of non-signatories to ascertain their consent to be bound by the arbitration agreement, highlighting the complexity of such determinations.
The Hon’ble Court held that the decision on whether a non-signatory guarantor can be impleaded as a party to arbitration is within the purview of the Arbitral Tribunal. This approach of the Court also aligned with the principle of competence-competence, empowering the tribunal to rule on its jurisdiction, including the involvement of non-signatory parties, as per Section 16 of the Arbitration and Conciliation Act, 1996.
Furthermore, the judgment highlighted the principles of natural justice, ensuring that non-signatory parties have the opportunity to raise objections regarding the jurisdiction of the Arbitral Tribunal. By entrusting the Arbitral Tribunal with the task of examining factual and legal aspects to determine the inclusion of non-signatory parties, the judgment upholds the integrity and fairness of the arbitration process.
In conclusion, the Delhi High Court’s judgment underscores the nuanced nature of arbitration agreements and affirms that the decision regarding the impleadment of non-signatory parties rests with the arbitral tribunal, which is empowered to delve into the complexities of such matters and ensure a fair and just resolution in accordance with the Arbitration and Conciliation Act, 1996.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/

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