Can the Arbitrator Lift the Corporate Veil? Yes and No. Yes, if you are in Delhi and Gujarat. No, if you are in Maharashtra and Tamil Nadu.
In this post, we are not concerned with lifting the corporate veil for extending an arbitration agreement to a non-signatory or at the stage of execution/ enforcement of an arbitral award, but whether an arbitral tribunal has the power to lift the corporate veil.
The Delhi High Court has decided in a case that the arbitrator could. The Bombay and the Madras High Courts have held that they cannot. Below is a table that summarises this position:
This
helpful article of 2021 summarises the legal position. Luckily, this point has been settled by the Supreme Court at least to a limited extent.
Sugesan Transport, a decision of the Madras High Court is a recent addition to this list of cases where courts have held that an arbitral tribunal does not have the power to lift the corporate veil.
In this post, we are not going to do a detailed critique of Sugesan Transport. Our objective is very limited: the purpose is to point out that precedents rendered on this aspect between Chloro Controls, 2012 INSC 436 and Cox & Kings (I), 2023 INSC 1051 should not be relied on, given the recent judgment of the Supreme Court in ASF Buildtech Private Limited vs. Shapoorji Pallonji and Company Private Limited, 2025 INSC 616.
In ASF Buildtech, the Supreme Court cautioned against relying on the decisions rendered further to Chloro Controls:
"31. The aversion or misconception that loomed before the various High Courts as regards the inhibition of an arbitral tribunal to resort to the principles of 'group of companies', 'alter-ego', agency etc. or to put it more simply, to implead a non-signatory to the arbitration proceedings on its own accord can be deftly traced to two pertinent observations that were made in Chloro Controls (supra).
40. Thus, due to the aforesaid, a misconception plagued the position of law that an arbitral tribunal does not have the authority or power to implead a non-signatory to the arbitration proceedings, and that only the courts are empowered to do so. It was largely in this backdrop that the decisions of Oil and Natural Gas Corporation Ltd. (supra), Balmer Lawrie & Co. Ltd. (supra), Sudhir Gopi (supra), V.G. Santhosam (supra) and other decisions of various different High Courts came to be rendered."
The purpose of this post, as stated before, is not to examine whether Sugesan Transport was wrongly decided, but to tentatively suggest that Sugesan Transport's reliance on pre-Cox & Kings decision in Sudhir Gopi v. Indira Gandhi National Open University, 2017 SCCOnLine Delhi 8345, on this issue was not the "direct answer" (Para 20, Sugesan Transport) to the question. Perhaps, the point was not even raised by counsels. ASF Builders does not even seem to be cited in Sugesan Transport. On the broader issue of impleadment of non-signatories by the arbitral tribunal, the Supreme Court went on to hold in ASF Builders that after Cox & Kings I, even arbitral tribunals could rely on various principles laid down to extend arbitration agreements to non-signatories:
"However, as discussed, the decision of Cox and Kings (I) (supra) has made it abundantly clear that the legal basis for the application of the 'Group of Companies' doctrine or any other principle for determining mutual consent is in the definition of "party" Under Section 2(1)(h) read with the meaning of "arbitration agreement" Under Section 7 of the Act, 1996. Since both the aforesaid provisions are not confined in their scope to either the courts or the arbitral tribunal, and rather exists ubiquitously on the statute book and is common or indifferent to both the courts and arbitral tribunals, there cannot be any gainsaying that even the arbitral tribunal now after the decision of Cox and Kings (I) (supra) could be said to be clothed with the power to take recourse to the various principles for determining mutual consent, and thereby implead a non-signatory to the arbitration, if such person is found to be bound to the arbitration agreement." (emphasis added)
In ASF Builders, the Supreme Court cited Cox & Kings (I) on the test of the Group of Companies doctrine:
"... it held that the test for determining applicability of the ‘Group of Companies’ doctrine envisages a cumulative and holistic determination of the factual aspects such as the relationship between and among the legal entities within the corporate group structure, their underlying contractual obligations, the commonality of the subject matter and the composite nature of the transactions undertaken, and their overall participation in the project / subject-matter for achieving a common purpose."
The doctrine cannot be applied casually due to "mere incidental involvement in the negotiation or performance of the contract" but the inquiry must "involve a comprehensive and holistic assessment of the composite relationship among the entities concerned, the underlying transactions, and the attendant circumstances evincing mutual intention to be bound by the arbitration agreement. The evaluation mustbe indicative that the involvement of the non-signatory was of such manner which was sufficient to lead the other parties to legitimately believe that the non-signatory was a veritable party to the contract."
ASF Builders went several steps further: Step 1: it held that these questions need not be decided by a court exclusively and could be decided by an arbitral tribunal:
"Thus, the archaic understanding that an arbitral tribunal is incapable or incompetent to identify and implead a non-signatory to the arbitration agreement on its own accord, is not the correct position of law, in view of the decisions of this Court in In Re: Interplay (supra) and Krish Spinning (supra).We find, that the limited nature and scope of inquiry which the referral courts are expected to undertake as regards the “existence” of the arbitration agreement, would as a logical sequitur obligate the arbitral tribunal also to look into this question. Such a question, by no stretch, can be regarded as falling within the exclusive domain or jurisdiction of the referral courts, so as to render any examination of it by the arbitral tribunal a usurpation of the referral courts authority and duty."
Step 2: It also held that the arbitral tribunal was better placed to decide the question:
"76. Owing to the intrinsic character of the test — being one that entails a fact-intensive inquiry involving a mixed question of fact and law — and further, given the extensive standard it demands, requiring a comprehensive and holistic appraisal of all material facts and attendant circumstances, it may be safely concluded that the arbitral tribunal is the more appropriate and competent forum to adjudicate upon the issue of whether a non-signatory is bound by the arbitration agreement, as the arbitral as it has the innate advantage of going through all the relevant evidence and pleadings in greater depth and detail than the referral court at the pre-reference stage, and as such is uniquely positioned to undertake such a nuanced determination."
Step 3: ASF Builders made a distinction between existence of an arbitration agreement and binding nature vis-a-vis a non-signatory and held that question of determining whether the non-signatory was a veritable party should be left to the tribunal. Pardon the lengthy quote:
"86. Once, the “existence” of the arbitration agreement is said to have been established, the condition stipulated in terms of Section 11 sub-section (6A)of the Act, 1996, is said to have been fulfilled, and the referral courts have no option but to refer the dispute to arbitration, notwithstanding whether the intention of a non-signatory as a veritable partly to such agreement is established or not. Apart from the pre-condition of examining the “existence” of an arbitration agreement, Section 11 of the Act, 1996 does not either contemplate or require determination of the "defined legal relationship" in terms of Section 7, nor does it mandate an assessment of the futuro intention of the parties, whether signatories or non-signatories, from the "express words" of the arbitration agreement. This limited inquiry does not extend to the substantive legal consequences or implications of such arbitration agreement. The question of whether a non-signatory is bound by the arbitration agreement is entirely separate from the question of its "existence." The latter is a relatively straightforward, procedural determination based onthe formal presence of the agreement, whereas the former involves a substantive and contextual inquiry into the mutual intent of the parties, which may be examined by the arbitral tribunal."
Step 4: ASF Builders stated that even if this was a question of existence of an arbitration agreement, it should be left to the arbitral tribunal to decide, in line with Cox & Kings (II), 2024 INSC 670, but that the arbitral tribunal should give the non-signatory a fair opportunity (Para 107).
Step 5: ASF Builders held that the arbitral tribunal has the power to implead non-signatories so long as "such impleadment is undertaken upon a consideration of the applicable legal principles — including, but not limited to, the doctrines of ‘group of companies’, ‘alter ego’, ‘composite transaction’, and the like —the arbitral tribunal is fully empowered to summon the non-signatory to participate in the arbitration." (Para 109). ASF Builders also relied on Adavya Projects Pvt. Ltd. v. Vishal Strcturals Pvt. Ltd., 2025 INSC 507 on this point.
Step 6: The jurisdiction of the arbitral tribunal includes questions as to who is the party to the arbitration agreement. (Para 137).
Step 7: Even if notice of arbitration is not given to a non-signatory, such a non-signatory could be impleaded subsequently (Paras 158, 160).
Now, let's come to the heart of the matter. Assume that if a person or an entity falls within the test for impleadment of a non-signatory as per Cox & Kings (I), there seem to be no reason to proscribe an arbitrator from lifting the corporate veil to see if that other person or entity is inside the veil. The inquiry into applying the Group of Companies doctrine and that of lifting the corporate veil, although not identical, could be similar in certain situations/ circumstances (See, for instance, Para 163, ASF Builders).
