Can a company be forced into arbitration without signing the contract?

A company never signed the contract. Yet ONGC dragged it to arbitration. The tribunal kicked it out. Now the Supreme Court says—wait, the tribunal didn't even look at the evidence that could prove the connection.

ONGC had paid Rs.55.78 crores in customs duty for a vessel operating contract, expecting reimbursement. The contractor, Discovery Enterprises Pvt. Ltd. (DEPL), failed to complete the duty drawback paperwork. The loss: Rs.63.88 crores. ONGC wanted its money back. But who pays when the company that signed the contract can't, and a sister company that never signed the contract might be able to?

The question the tribunal skipped

Can a company be forced into arbitration without ever signing the arbitration agreement? The answer depends on a legal doctrine called the "group of companies" doctrine — the idea that companies within the same corporate group can sometimes be treated as one entity for arbitration purposes. But before the Supreme Court could answer that question, it had to deal with a procedural failure: the arbitral tribunal never decided ONGC's application to get documents that would prove the group connection.

When the vessel contract went wrong

In March 2006, ONGC awarded a contract to DEPL for operating a vessel. The contract document, thick with clauses and appendices, sat in a file that would later grow heavy with legal notices. Clause 37 — the arbitration clause — was buried somewhere in its pages. ONGC paid Rs.55.78 crores as customs duty, expecting DEPL to complete the duty drawback formalities and recover that money. DEPL didn't. The loss ballooned to Rs.63.88 crores.

ONGC believed DEPL was part of the DP Jindal Group, along with another company called JDIL. So when ONGC invoked arbitration in April 2008, it named both DEPL and JDIL as respondents. JDIL immediately objected: "We never signed this contract. We are not a party to the arbitration agreement."

The arbitral tribunal — composed of three members — had to decide whether JDIL could be dragged into arbitration as a non-signatory (a company that never signed the contract). JDIL filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 (the provision that allows a party to challenge the tribunal's jurisdiction).

The discovery application that got ignored

ONGC didn't just argue. It asked the tribunal for discovery of documents — a legal process where one party can demand the other produce relevant documents. ONGC wanted documents that would show JDIL and DEPL were so closely connected that they should be treated as one entity under the group of companies doctrine. The application sat on the tribunal's table, its pages untouched, while the tribunal moved to decide jurisdiction.

The tribunal never decided that application. Instead, in October 2010, it passed an interim award — a sheaf of pages that ruled it had no jurisdiction over JDIL. The tribunal relied on the definitions under Section 2(1)(h) (which defines "party" to an arbitration) and Section 7 (which defines an arbitration agreement). Since JDIL wasn't named in the contract, the tribunal said, it couldn't be bound by the arbitration clause.

ONGC appealed to the Bombay High Court under Section 37 of the Act (which allows appeals against certain orders of the tribunal). The High Court dismissed the appeal in June 2012. The courtroom fell silent as the order was read out, the judge's bench impassive.

Three failures the Supreme Court found

ONGC then approached the Supreme Court. The bench — Justice Dr. Dhananjaya Y. Chandrachud, Justice Surya Kant, and Justice Vikram Nath — heard the matter and delivered judgment on April 27, 2022. The courtroom was quiet as the judgment was pronounced, the weight of the case file visible in the hands of counsel.

The Supreme Court found three fundamental problems with the tribunal's interim award.

First, the tribunal never decided ONGC's discovery application. The court called this a "failure" that vitiated (invalidated) the entire interim award. How could the tribunal decide it lacked jurisdiction without first examining the evidence ONGC wanted to produce? The discovery application was directly relevant to establishing whether the group of companies doctrine applied. As the court held, "the failure to decide the discovery application vitiates the interim award" — a direct quote from the judgment that anchored the entire reasoning.

Second, the tribunal failed to determine the legal foundation for the group of companies doctrine. The court noted that the tribunal simply assumed the doctrine couldn't apply, without properly analyzing the law. The Supreme Court had already recognized the group of companies doctrine in earlier cases like Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. (2013) and Cheran Properties Ltd. v. Kasturi & Sons Ltd. (2018). The tribunal should have examined whether the facts of this case fell within that doctrine.

Third, the tribunal prematurely deferred ONGC's other applications. The tribunal had put off deciding certain applications without giving ONGC a fair chance to make its case.

What the group of companies doctrine actually says

The Supreme Court took the opportunity to clarify the law. Under the group of companies doctrine, an arbitration agreement signed by one company in a corporate group can bind non-signatory affiliates (other companies in the same group that didn't sign) if the circumstances show a mutual intention to bind both signatory and non-signatory parties.

The court listed five factors to consider: (1) the mutual intent of the parties, (2) the relationship of the non-signatory to the signatory, (3) the commonality of the subject matter, (4) the composite nature of the transaction, and (5) the actual performance of the contract.

This isn't automatic. Just being in the same corporate group isn't enough. The court must look at the specific facts — did the non-signatory company participate in negotiating the contract? Did it benefit from the contract? Did it act as if it were bound? The smell of old paper from the case file seemed to fill the courtroom as the bench reviewed the facts.

The Supreme Court also clarified an important procedural point: when a party appeals under Section 37(2)(a) against a tribunal's decision that it lacks jurisdiction, the court's appellate power is not as limited as it would be under Section 34 (which governs challenges to final awards). The court can examine the tribunal's reasoning more closely, though it must still give deference to the tribunal's findings.

The procedural backdrop

The case had a tangled procedural history. While the arbitration against JDIL was stalled, ONGC had withheld payments to JDIL under separate contracts — contracts that had nothing to do with the vessel operating agreement. JDIL initiated a second arbitration over those withheld payments and won. The Supreme Court noted this irony: ONGC had tried to use the group of companies doctrine to bring JDIL into the first arbitration, but had also treated JDIL as a separate entity by withholding payments under distinct contracts. The court, however, did not let this procedural complexity distract from the core issue: the tribunal's failure to decide the discovery application.

The judgment also engaged with several precedents, including Indowind Energy Ltd. v. Wescare (I) Ltd. (2010), MTNL v. Canara Bank (2020), and Ameet Lalchand Shah v. Rishabh Enterprises (2018), among others. These cases established the contours of the group of companies doctrine and the limits of a tribunal's jurisdiction over non-signatories. The court wove these precedents together to create a coherent framework for future cases.

What the judgment means for arbitration practice

For practitioners, this judgment carries a clear message: a tribunal cannot shortcut the jurisdictional question by ignoring a party's application for evidence. If a party says "give me documents to prove the connection," the tribunal must decide that application before ruling on jurisdiction. Skip that step, and the entire interim award becomes vulnerable.

The judgment also reinforces the importance of the group of companies doctrine as a tool for bringing related entities into arbitration. But it warns that the doctrine is not a rubber stamp — courts and tribunals must carefully examine the facts before binding a non-signatory.

Another key takeaway: the appellate standard under Section 37(2)(a) is broader than under Section 34. When a tribunal says "we have no jurisdiction," the court can look at the tribunal's reasoning more closely than it could if the tribunal had accepted jurisdiction. This distinction matters for parties deciding whether to appeal a jurisdictional ruling.

THE PLAY: When invoking arbitration against a non-signatory under the group of companies doctrine, file a discovery application for documents showing the corporate connection — and ensure the tribunal decides it before ruling on jurisdiction, or the interim award can be set aside.

The case goes back to the tribunal. The discovery application will finally be decided. And then — maybe — the real question gets answered: can JDIL be forced into arbitration without signing the contract?