1    

IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NOS 10025-10026  OF 2017     

CHERAN PROPERTIES LIMITED             ..Appellant   

VERSUS  

KASTURI AND SONS LIMITED AND ORS       ..Respondents    

J U D G M E N T   

Dr D Y CHANDRACHUD, J  

1  The appeals in the present case arise under Section 423 of the  

Companies Act, 2013 against a judgment and order of the National Company  

Law Appellate Tribunal1  dated 18 July 2017.  The NCLAT has dismissed an  

appeal filed against an order dated 6 March 2017 of the National Company Law  

Tribunal2 at its Chennai Bench.   

                                                           1 NCLAT  2 NCLT  

REPORTABLE

2    

2 The second respondent is a company by the name of Sporting Pastime  

India Limited3. It was incorporated on 2 May 1994, as a fully owned subsidiary  

of the first respondent, Kasturi & Sons Limited4.  On 19 July 2004 an agreement  

was entered into between KC Palanisamy5 (the third respondent), KSL (the first  

respondent) and SPIL and a company by the name of Hindcorp Resorts Pvt.  

Ltd. (Hindcorp). Under the agreement SPIL was to allot 240 lakh equity shares  

of Rs 10 each, fully paid up at par to KSL against the book debts due by SPIL  

to KSL. KSL offered to sell to KCP or his nominees 243 lakh equity shares  

representing 90 per cent of the total paid up share capital for a lumpsum  

consideration of Rs 2,31,50,000.     The intention of the parties, as reflected in  

the agreement, was that KCP would take over the business, shares and  

liabilities of SPIL and would discharge the liabilities set out in Schedules 2 and  

3 of the agreement which were outstanding on the date of the agreement.  KCP  

agreed to discharge the Schedule 2 liabilities within 180 days from the date on  

which he took over management of SPIL. Clause 14 of the agreement was to  

the following effect:  

“KSL hereby recognise the right of KCP and/or his nominees  

to sell or transfer their holding in SPIL to any other person of  

their choice, provided the proposed transferees accept the  

terms and conditions mentioned in this agreement for the  

management of SPIL and related financial aspects covered by  

this agreement.”  

                                                           3 SPIL  4 KSL  5 KCP

3    

The agreement contained the following provision for resolution of disputes by  

arbitration:  

“In the unlikely case of dispute arising out of this agreement  relating to claims and counter claims, the parties hereto agree  

that the same shall be referred to Arbitration under he Indian  

Arbitration Law. The arbitration shall be by three arbitrators.   

KCP shall be entitled to appoint one arbitrator.  KSL shall be  

entitled to appoint one arbitrator.  The two arbitrators so  

appointed shall elect the third arbitrator.”  

An amount of Rs 2.5 crores was paid by KCP as against a total consideration  

of Rs 30 crores.  Ninety per cent of the shares were transferred by KSL to KCP  

and to his nominees in the following manner:  

• One share to KCP  

• Ninety five per cent shares to Cheran Properties Limited, the appellant  

• One share each to Cheran Enterprises Pvt.Ltd., KCP Associates  

Holdings P. Ltd., CG Holdings (P) Ltd. and Cheran Holdings P. Ltd.  

On 17 August 2004, a letter was addressed by KCP acting as the authorized  

signatory of the appellant to KSL.  The letter specifically contained a reference  

to the share purchase agreement dated 19 July 2004. The text of the letter is  

extracted below:  

“Re: SHARE PURCHASE AGREEMENT DT.19.7.04  

In pursuance of the above Agreement, you have agreed to sell and our  

Group Companies, by themselves and/or by their nominees have  

agreed to purchase shares in Sporting Pastime India Limited of a face  

value of Rs. 2,430 lakhs, for a sum of Rs. 243.00 lakhs.  

Accordingly we send herewith seven Share Transfer Deeds duly  

executed by us and we request you to execute the same and lodge

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them with Sporting Pastime India Limited together with relevant Share  

Certificates for registering the transfers in the Following names :  

1. C G Holdings (P) Ltd.  

2. Cheran Holdings P Ltd.  

3. KCP Associates Holdings P. Ltd   

4. Mr K C Palanisomi  

5. Cheraan Properties Limited   

6. Cherraan Properties Limited    242,99.994  

7. Cherraan Properties Limited        

Total      243.00.000  

We enclose a Demand Draft no. 788401 dt. 16.08.04, drawn on ABN  

AMRO Bank, for Rs. 2,43,00,000, (Rupees Two Crores lakhs only)  

towards Share Consideration as above. Kindly acknowledge receipt  

thereof.  

We will now have to draw up a Supplementary Agreement to the above  

Share Purchase Agreement to reflect the altered consideration. We will  

also have to sign all the Annexures to the Agreement.  

There are certain outstanding guarantees issued by you, to the parties  

listed in Schedule 2 to the above Agreement. You are requested to  

keep your guarantees in good standing in accordance with the terms  

of the Agreement. We shall relieve your guarantees in accordance with  

the Agreement”.      

3 Since the transaction was not completed by KCP, disputes arose  

between the parties resulting in the commencement of arbitral proceedings. On  

16 December 2009 the arbitral tribunal made its award in the following terms:  

“28.0 Award  

28.01 In the result this Arbitral Tribunal passes the final  

Award in the arbitration matter between M/s Kasturi & Sons  

Limited M/s Hindcorp Resorts Private Limited, the claimants  

and Mr K C Palaniswami and M/s Sporting Pastime India  

Limited, the respondents:-  

(i) Directing the respondents to return to the claimants the  

documents of title and share certificates relating to 2,43,00,000  

shares of the second respondent namely Sporting Pastime  

India Limited, which were handed over earlier to the first  

respondent pursuant to the agreement dated 19/07/2004 in the  

manner following :

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(a) The documents of title relating to the second claimant  

being part of the documents of title referred to above to the  

second claimant, forthwith.  

(b) The documents of title pertaining to the first claimant  

being part of the documents of title referred to in (a) above and  

the share certificates pertaining to 2,43,00,000 shares referred  

to above contemporaneously with the first claimant paying /  

tendering the sum of Rs. 3,58,11,000/- (Rs. Three crores fifty  

eight thousand eleven thousand only) to the first respondent as  

per para 27.01 with interest @ 12% p.a. on Rs. 2,55,00,000/-  

from the date of award till 17/01/2010 or earlier payment/tender  

and thereafter @ 18% p.a. on Rs. 2,50,00,000/- till date of  

payment / tendering of the amount of Rs. 3,58,11,000/-  

(ii) Dismissing the counter – claim of the respondents for  

Rs. 8,83,23,086/-  

(iii) Directing the respondents to bear the costs of the  

proceedings in a sum of Rs. 60,15,000/- the claimants being  

entitled to the same in para 23.09 hereinabove and the same  

having been set-off in the manner stated in para 26.01  

hereinabove.  

(Iv) Directing the respondents to bear their own costs in  

both the claim and the counter-claim.”  

Under the terms of the award, a direction was issued under which KCP and  

SPIL were required to return documents of title and share certificates relating  

to 2.43 crore shares contemporaneously with KSL paying an amount of Rs  

3,58,11,000 together with interest at 12% p.a. on a sum of Rs 2.55 crores.  

4 KCP challenged the award of the arbitral tribunal under Section 34 of the  

Arbitration and Conciliation Act, 1996.  The challenge was repelled by a learned  

Single Judge of the Madras High Court by a judgment and order dated 30 April  

2015.  The appeal filed by KCP was dismissed by the Division Bench of the  

High Court on 24 January 2017.  This Court dismissed the Special Leave

6    

Petition challenging the judgment of the Division Bench on 10 February 2017.  

The award has attained finality.  

5 KSL initiated proceedings, inter alia, under Section 111 of the Companies  

Act, 1956 read with Sections 397, 398, 402 and 403, among other things, for  

rectification of the register of SPIL.  NCLT allowed the petition by its order dated  

6 March 2017.  The decision of the NCLT was affirmed by NCLAT on 3 May  

2017.  

6 NCLAT held that the appellant is a nominee of KCP and holds the shares  

in question on his behalf. Hence, NCLT was held to be justified in entertaining  

the proceedings for rectification under Section 111.  For coming to the  

conclusion that the appellant is a nominee of KCP and held the shares on his  

behalf, reliance has been placed on a judgment dated 29 April 2011 of the  

Madras High Court inter partes in an application under Section 9 of the  

Arbitration and Conciliation Act, 1996. The Madras High Court formulated the  

following questions for consideration:  

“(1) Whether an order of interim injunction can be passed  

against the respondents who are not party  to the arbitration  

agreement or arbitration proceedings;  

(2) Whether the respondents 3 to 6 can be said to be nominees  

of Sri K.C. Palanisamy so as to be bound by the Arbitration  

Award, for passing interim direction against them.”   

7    

The High Court came to the conclusion that clause 14 of the agreement dated  

19 July 2004 recognise the right of KCP to transfer his holding in SPIL to a  

person of his choice, provided that the proposed transferee accepts the terms  

and conditions mentioned in the agreement for the management of SPIL  

together with related financial aspects covered by the agreement.  The High  

Court held that the shares had not been purchased by the appellant as a matter  

of an independent right but as a nominee of KCP.  The purchase of the shares  

was in pursuance of the agreement dated 19 July 2004.  Rectification of the  

register was held to have been ordered by the NCLT correctly. The appeal was  

dismissed.  

7 We have heard Mr Kapil Sibal and Dr Abhishek Manu Singhvi, learned  

senior counsel in support of the appeal and Mr Mukul Rohtagi and Mr Arvind  

Datar, learned senior counsel on behalf of the respondents.  

8 On behalf of the appellants it has been urged that:  

Firstly, the appellant is not a party to the arbitration agreement  

contained in clause 21 of the agreement dated 19 July 2004.   

This agreement was entered into between KCP, KSL, SPIL and  

Hindcorp.  Even though the appellant purchased the shares of  

SPIL as a nominee of KCP, the arbitral award which has been  

rendered in proceedings between the parties to the agreement  

dated 19 July 2004 does not bind the appellant;

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Secondly, the principle that an arbitration agreement will, under  

Section 7, bind only parties and not a third party in the position  

of the appellant, is settled by the decisions of this Court in  

Indowind Energy Limited v Wescare (India) Limited6 and in  

S.N.Prasad, Hitek Industries (Bihar) Limited v Monnet  

Finance Limited7;  

Thirdly, an arbitral award has to be enforced as a decree of a  

civil court in view of the provisions of Section 36.  The arbitral  

award could not have been enforced by pursuing proceedings  

before the NCLT;  

Fourthly, though a review was sought before the NCLAT on the  

basis of the law laid down by this Court in Indowind (supra) it  

was summarily dismissed on the ground that there was no error  

in the original judgment.  

9 Mr Kapil Sibal, learned senior  counsel, has basically urged three  

submissions in support.  

Firstly  the appellant ought to have been, but was not impleaded  

as a party to the arbitral proceedings (obviously because it was  

not a party to the arbitration agreement).  The appellant has  

                                                           6 (2010) 5 SCC 306  7 (2011) 1 SCC 320

9    

paid valuable consideration for the shares purchased by it.  KSL  

proceeded on a wrong legal basis in the first place and has  

compounded its legally untenable approach by selecting a  

wrong remedy by moving the NCLT;  

Secondly, Chloro Controls India Private Limited v Severn  

Trent Water Purification Inc.8 does not apply because it deals  

with an international arbitration under Section 45 whereas this  

was a case of a domestic arbitration.  The provisions of Section  

45 must be distinguished from  unamended Section 8 of the  

Arbitration and Conciliation Act 1996.  The appellant  is not a  

party to the arbitration agreement and having paid  

consideration for its purchase of shares, is not bound by the  

arbitral award;  

Thirdly,  the decision in Chloro Controls has been clarified by  

this Court in Duro Felguera, S.A. v Gangavaram Port  

Limited9.  

10 Dr Abhishek Manu Singhvi has in his submissions addressed the Court  

on the following propositions.  

                                                           8 (2013) 1 SCC 641  9 (2017) 9 SCC 729

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Firstly, the arbitral award dated 16 December 2009 cannot be  

executed against the appellant which is admittedly not a  

signatory to the agreement dated 19 July 2004 which contains  

a provision for arbitration;  

Secondly, the arbitral award cannot be executed by a Tribunal  

such as the NCLT/NCLAT in a “camouflaged petition” (under  

Sections 111, 397, 398, 402 and 403 of the Companies Act  

1956) which would be barred by Section 42 of the Arbitration  

and Conciliation Act, 1996;  

Thirdly, the prayer seeking a rectification of the register of  

members fails to meet the strict requirements of Sections 111  

and 111 A of the erstwhile Companies Act 1956 and hence the  

direction to rectify the register of members is fallacious;  

Fourthly, NCLAT as well as NCLT have failed to explain or  

distinguish the settled principle of law laid down in the judgment  

of this Court in Indowind;  

Fifthly, reliance on the letter dated 17 August 2004 addressed  

on behalf of the appellant and on the order of the Madras High  

Court in the petition under Section 9 is misconceived;  

Sixthly, during the course of the proceedings under Section 9,  

counsel for the appellant had conceded that the expression

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‘party’ means a party to the arbitration agreement and which is  

actually before the arbitral tribunal;  

Seventhly, for the Chloro Controls principle to be attracted, the  

following requirements are necessary:  

(a) there has to be a joint venture agreement;  

(b) there must be a mother agreement;  

(c) the mother agreement must contain an arbitration  

agreement;  

(d) agreements ancillary to the mother agreement need not  

contain an arbitration agreement; and  

(e) there must be a finding that the ancillary agreements cannot  

be performed in the absence of the mother agreement.     

11 On the other hand, it has been urged on behalf of the respondents that:  

Firstly, Clause 14 of the agreement dated 19 July 2004  

specifically provides that the nominees of KCP would be bound  

by the agreement.  The recognition of the right of KCP to sell or  

transfer his holdings in SPIL was expressly subject to the  

condition that the proposed transferees would accept the terms  

and conditions of the agreement.  Such an acceptance would  

necessarily include all its provisions including the arbitration  

agreement contained in clause 21;

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Secondly, the condition for KCP’s nominees to obtain the  

shares of SPIL having been spelt out in clause 14, the appellant  

is merely a nominee and is not entitled to raise the present  

dispute;  

Thirdly, in the order of the High Court dated 29 April 2011 under  

Section 9 of the Arbitration and Conciliation Act 1996, the  

appellant was held specifically to be a nominee of KCP whose  

purchase of shares was referable to the agreement dated 19  

July 2004.  The appellant which is a party to those proceedings   

has not challenged the finding;  

Fourthly, the arbitral award has the status of a decree under  

Section 36 and can be enforced “as if” it is a decree of the court.  

Under the Companies Act, no matter relating to the transfer of  

shares can be decided except by the NCLT after 2013.  KSL  

requires physical custody of the share certificates and  

rectification of the share register.  Mere transfer of the physical  

custody of the share certificates wold not be sufficient, since a  

rectification of the share register is required to perfect the title  

of KSL. Consequently, it was necessary for KSL to move the  

NCLT for rectification of the share register under Section 111; and  

Fifthly, the principle that an arbitral award may bind a group  

company, which is an affiliate of a signatory to the arbitration

13    

agreement has been settled in a judgment of a three judge  

bench of this Court in Chloro Controls. While there can be no  

dispute about the applicability of the Indowind principle in the  

generality of cases, attribution of an arbitral award to a group  

company is governed by the decision in Chloro Controls  

(supra).  

12 Mr Mukul Rohtagi and Mr Arvind Datar have countered the submissions  

which were urged on behalf of the appellant. They have urged that:  

Firstly, each of the submissions which are sought to be  

advanced before this Court in the present appeals were urged  

before the Madras High Court in the proceedings under  

Section 9.  The Madras High Court has categorically rejected  

those submissions and has held that the appellant, at all  

material times, acted as a nominee of KCP under the  

agreement dated 19 July 2004.  The appellant’s letter of 17  

August 2004 categorically contains a reference to the earlier  

agreement and establishes beyond doubt that the appellant   

assumed all the obligations under the agreement, including the  

remedy of arbitration;  

Secondly, Indowind is essentially a case under Section 11 of  

the Arbitration and Conciliation Act, 1996.  In the present case  

the Court is dealing with a post award enforcement;

14    

Thirdly, Section 35 of the Arbitration and Conciliation Act, 1996  

indicates that an arbitral award binds parties to an arbitration  

and persons claiming under them.  The appellant has, at all  

material times, been aware of the fact that it was claiming  

under KCP in pursuance of the original agreement dated 19  

July 2004 and its letter dated 17 August 2004;  

Fourthly, the judgment in Chloro Controls explains the  

concept of a person claiming under a party to an arbitration  

agreement and is attracted to the present case on all fours; and  

Fifthly, the consequence of the arbitral award is to envisage a  

transmission of the shares to KSL by operation of law.  This  

being the position, the CLB could have directed a rectification  

of the register of the company.  Upon the constitution of the  

NCLT, exclusive jurisdiction to do so stands vested in it.  The  

transmission of shares, as a consequence of law under the  

arbitral award, has to be given effect to by a formal rectification  

of the register.  To effectuate this, the only remedy which is  

available to KSL was to move the NCLT for rectification.   

13 The rival submissions will now be analysed.  

14 Section 7 of the Arbitration and Conciliation Act, 1996 provides thus:  

15    

“7 Arbitration agreement. —  

(1) In this Part, “arbitration agreement” means an agreement  

by the parties to submit to arbitration all or certain disputes  

which have arisen or which may arise between them in respect  

of a defined legal relationship, whether contractual or not.  

(2) An arbitration agreement may be in the form of an  

arbitration clause in a contract or in the form of a separate  

agreement.  

(3) An arbitration agreement shall be in writing.  

(4) An arbitration agreement is in writing if it is contained in—  

(a) a document signed by the parties;  

(b) an exchange of letters, telex, telegrams or other means of  

telecommunication which provide a record of the agreement;  

or  

(c) an exchange of statements of claim and defence in which  

the existence of the agreement is alleged by one party and not  

denied by the other.  

(5) The reference in a contract to a document containing an  

arbitration clause constitutes an arbitration agreement if the  

contract is in writing and the reference is such as to make that  

arbitration clause part of the contract.”  

While interpreting Section 7 in Indowind, a two Judge Bench of this Court held  

that:  

“It is fundamental that a provision for arbitration to constitute  

an arbitration agreement for the purpose of Section 7 should  

satisfy two conditions: (i) it should be between the parties to  

the dispute; and (ii) it should relate to or be applicable to the  

dispute.”   

That was a case where an agreement of sale was entered into between W and  

S.  The agreement described S and its nominee as a buyer and as the promoter  

of Indowind. Under the agreement, the seller agreed to transfer to the buyer  

certain assets for a consideration which was payable partly in cash and partly  

by the issue of equity shares.  The Board of Directors of W accorded approval  

to the agreement, as did the Board of S.  No approval was, however, granted  

by the Board of Directors of Indowind.  According to W, certain disputes arose

16    

between it and S and Indowind on the other. W filed a petition under Section  

11(6) against S and Indowind for appointment of a sole arbitrator.  Indowind  

resisted the petition on the ground that it was not a party to the agreement which  

was entered into between W and S.  The Chief Justice of the Madras High Court  

allowed the application for appointment of an arbitrator, holding that though  

Indowind was not a signatory to the agreement, it was bound.  In appeal, this  

Court held that W had not entered into an agreement with Indowind, referring  

to the agreement which contained an arbitration agreement, with an intention  

to make the arbitration agreement a part of their agreement. In the view of this  

Court:  

“..The question is when Indowind is not a signatory to the  

agreement dated 24-2-2006, whether it can be considered to  

be a “party” to the arbitration agreement. In the absence of any  

document signed by the parties as contemplated under clause  

(a) of sub-section (4) of Section 7, and in the absence of  

existence of an arbitration agreement as contemplated in  

clauses (b) or (c) of sub-section (4) of Section 7 and in the  

absence of a contract which incorporates the arbitration  

agreement by reference as contemplated under sub-section  

(5) of Section 7, the inescapable conclusion is that Indowind is  

not a party to the arbitration agreement. In the absence of an  

arbitration agreement between Wescare and Indowind, no  

claim against Indowind or no dispute with Indowind can be the  

subject-matter of reference to an arbitrator. This is evident from  

a plain, simple and normal reading of Section 7 of the Act.”  

The fact that the agreement was entered into by S as the promoter of Indowind  

and described the latter as its nominee and that the agreement was signed on  

behalf of S by a person who was also a director of Indowind was held not to  

make any difference.  This Court held that S and Indowind were two  

independent companies each of which was a separate and distinct legal entity

17    

and the mere fact that the companies had common shareholders or a common  

Board of Directors will not make them a single entity.  Nor could there be an  

inference that one company would be bound by the acts of the other.  In the  

view of this Court:  

“..A contract can be entered into even orally. A contract can be  

spelt out from correspondence or conduct. But an arbitration  

agreement is different from a contract. An arbitration  

agreement can come into existence only in the manner  

contemplated under Section 7. If Section 7 says that an  

arbitration agreement should be in writing, it will not be  

sufficient for the petitioner in an application under Section 11  

to show that there existed an oral contract between the parties,  

or that Indowind had transacted with Wescare, or Wescare had  

performed certain acts with reference to Indowind, as proof of  

arbitration agreement.”  

15 The decision in Indowind was followed by a two Judge Bench in Prasad  

(supra). The issue in that case was whether a guarantor to a loan who is not a  

party to a loan agreement between the lender and borrower could be made a  

party to a reference to an arbitration in regard to a dispute governing the  

repayment of the loan and be subjected to the arbitral award. The loan  

agreement contained an arbitration clause.  In the view of this Court:  

“An arbitration agreement between the lender on the one hand  

and the borrower and one of the guarantors on the other,  

cannot be deemed or construed to be an arbitration agreement  

in respect of another guarantor who was not a party to the  

arbitration agreement. Therefore, there was no arbitration  

agreement as defined under Sections 7(4)(a) or (b) of the Act,  

insofar as the appellant was concerned, though there was an  

arbitration agreement as defined under Section 7(4)(a) of the  

Act in regard to the second and third respondents..”  

18    

Consequently, the impleadment of the appellant as party to the arbitration  

proceedings and the award were held to be unsustainable.  The principle which  

was formulated by the Court was this:  

“..The Act makes it clear that an arbitrator can be appointed  

under the Act at the instance of a party to an arbitration  

agreement only in respect of disputes with another party to the  

arbitration agreement. If there is a dispute between a party to  

an arbitration agreement, with other parties to the arbitration  

agreement as also non-parties to the arbitration agreement,  

reference to arbitration or appointment of arbitrator can be only  

with respect to the parties to the arbitration agreement and not  

the non-parties.”  

16 Both these decisions were prior to the three Judge Bench decision in  

Chloro Controls (supra). In Chloro Controls this Court observed that  

ordinarily, an arbitration takes place between persons who have been parties  

to both the arbitration agreement and the substantive contract underlying it.   

English Law has evolved the “group of companies doctrine” under which an  

arbitration agreement entered into by a company within a group of corporate  

entities can in certain circumstances bind non-signatory affiliates. The test as  

formulated by this Court, noticing the position in English law, is as follows:  

“Though the scope of an arbitration agreement is limited to the  

parties who entered into it and those claiming under or through  

them, the courts under the English law have, in certain cases,  

also applied the “group of companies doctrine”. This doctrine  

has developed in the international context, whereby an  

arbitration agreement entered into by a company, being one  

within a group of companies, can bind its non-signatory  

affiliates or sister or parent concerns, if the circumstances  

demonstrate that the mutual intention of all the parties was to  

bind both the signatories and the non-signatory affiliates. This  

theory has been applied in a number of arbitrations so as to  

justify a tribunal taking jurisdiction over a party who is not a

19    

signatory to the contract containing the arbitration agreement.  

[Russell on Arbitration (23rd Edn.)]  

This evolves the principle that a non-signatory party could be  

subjected to arbitration provided these transactions were with  

group of companies and there was a clear intention of the  

parties to bind both, the signatory as well as the non-signatory  

parties. In other words, “intention of the parties” is a very  

significant feature which must be established before the scope  

of arbitration can be said to include the signatory as well as the  

non-signatory parties.”  

The Court held that it would examine the facts of the case on the touch-stone  

of the existence of a direct relationship with a party which is a signatory to the  

arbitration agreement, a ‘direct commonality’ of the subject matter and on  

whether the agreement between the parties is a part of a composite transaction:  

“A non-signatory or third party could be subjected to arbitration  

without their prior consent, but this would only be in exceptional  

cases. The court will examine these exceptions from the  

touchstone of direct relationship to the party signatory to the  

arbitration agreement, direct commonality of the subject-matter  

and the agreement between the parties being a composite  

transaction. The transaction should be of a composite nature  

where performance of the mother agreement may not be  

feasible without aid, execution and performance of the  

supplementary or ancillary agreements, for achieving the  

common object and collectively having bearing on the dispute.  

Besides all this, the court would have to examine whether a  

composite reference of such parties would serve the ends of  

justice. Once this exercise is completed and the court answers  

the same in the affirmative, the reference of even non-

signatory parties would fall within the exception afore-

discussed.”  

Explaining the legal basis that may be applied to bind a non-signatory to an  

arbitration agreement, this Court held thus:  

“The first theory is that of implied consent, third-party  

beneficiaries, guarantors, assignment and other transfer

20    

mechanisms of contractual rights. This theory relies on the  

discernible intentions of the parties and, to a large extent, on  

good faith principle. They apply to private as well as public legal  

entities.  

The second theory includes the legal doctrines of agent-

principal relations, apparent authority, piercing of veil (also  

called “the alter ego”), joint venture relations, succession and  

estoppel. They do not rely on the parties' intention but rather  

on the force of the applicable law.  

..  

We have already discussed that under the group of companies  

doctrine, an arbitration agreement entered into by a company  

within a group of companies can bind its non-signatory  

affiliates, if the circumstances demonstrate that the mutual  

intention of the parties was to bind both the signatory as well  

as the non-signatory parties.”  

The position in Indowind was formulated by a Bench of two Judges before the  

evolution of law in the three Judge Bench decision in Chloro Controls.  

Indowind arose out of a proceeding under Section 11(6).  The decision turns  

upon a construction of the arbitration agreement as an agreement which binds  

parties to it. The decision in Prasad evidently involved a guarantee, where the  

guarantor who was sought to be impleaded as a party to the arbitral proceeding  

was not a party to the loan agreement between the lender and borrower.  The  

loan agreement between the lender and borrower contained an arbitration  

agreement. The guarantor was not a party to that agreement.    

17 As the law has evolved, it has recognised that modern business  

transactions are often effectuated through multiple layers and agreements.   

There may be transactions within a group of companies. The circumstances in  

which they have entered into them may reflect an intention to bind both

21    

signatory and non-signatory entities within the same group. In holding a non-

signatory bound by an arbitration agreement, the Court approaches the matter  

by attributing to the transactions a meaning consistent with the business sense   

which was intended to be ascribed to them. Therefore, factors such as the  

relationship of a non-signatory to a party which is a signatory to the agreement,  

the commonality of subject matter and the composite nature of the transaction  

weigh in the balance.  The group of companies doctrine is essentially intended  

to facilitate the fulfilment of a mutually held intent between the parties, where  

the circumstances indicate that the intent was to bind both signatories and non-

signatories. The effort is to find the true essence of the business arrangement  

and to unravel from a layered structure of commercial arrangements, an intent  

to bind someone who is not formally a signatory but has assumed the obligation  

to be bound by the actions of a signatory.  

 18 International conventions on arbitration as well as the UNCITRAL Model  

Law mandate that an arbitration agreement must be in writing.  Section 7 of the  

Arbitration and Conciliation Act, 1996 affirms the same principle.  Why does the  

law postulate that there should be a written agreement to arbitrate? The reason  

is simple.  An agreement to arbitrate excludes the jurisdiction of national courts.   

Where parties have agreed to resolve their disputes by arbitration, they seek to  

substitute a private forum for dispute resolution in place of the adjudicatory  

institutions constituted by the state.  According to Redfern and Hunter on  

International Arbitration,  the requirement of an agreement to arbitrate in writing  

is an elucidation of the principle that the existence of such an agreement should

22    

be clearly established, since its effect is to exclude the authority of national  

courts to adjudicate upon disputes.10   

   19 Does the requirement, as in Section 7, that an arbitration agreement be  

in writing exclude the possibility of binding third parties who may not be  

signatories to an agreement between two contracting entities? The evolving  

body of academic literature as well as adjudicatory trends indicate that in certain  

situations, an arbitration agreement between two or more parties may operate  

to bind other parties as well.  Redfern and Hunter explain the theoretical  

foundation of this principle:  

“..The requirement of a signed agreement in writing, however,  does not altogether exclude the possibility of an arbitration  agreement concluded in proper form between two or more  parties also binding other parties.  Third parties to an arbitration  agreement have been held to be bound by (or entitled to rely  on) such an agreement in a variety of ways: first, by operation  of the ‘group of companies’ doctrine pursuant to which the  benefits and duties arising from an arbitration agreement may  in certain circumstances be extended to other members of the  same group of companies; and, secondly, by operation of  general rules of private law, principally on assignment, agency,  and succession..11”  

     The group of companies doctrine has been applied to pierce the corporate veil   

to locate the “true” party in interest, and more significantly, to target the  

creditworthy member of a group of companies12. Though the extension of this  

doctrine is met with resistance on the basis of the legal imputation of corporate  

                                                           10 Redfern and Hunter on International Arbitration, Fifth Edition – 2.13, p.89-90  11 Id at page 99  12 Redfern and Hunter (supra) 2.40, page 100

23    

personality, the application of the doctrine turns on a construction of the  

arbitration agreement and the circumstances relating to the entry into and  

performance of the underlying contract.13    

Russel on Arbitration14 formulates the principle thus:  

“Arbitration is usually limited to parties who have consented to  the process, either by agreeing in their contract to refer any  disputes arising in the future between them to arbitration or by  submitting to arbitration when a dispute arises. A party who has  not so consented, often referred to as a third party or a non- signatory to the arbitration agreement, is usually excluded from  the arbitration. There are however some occasions when such  a third party may be bound by the agreement to arbitrate.  For  example, …, assignees and representatives may become a  party to the arbitration agreement in place of the original  signatory on the basis that they are successors to that party’s  interest and claim “through or under” the original party.  The  third party can then be compelled to arbitrate any dispute that  arises.”  

Garry B Born in   his   treatise   on   International Commercial Arbitration   

indicates that:  

 “The principal legal bases for holding that a non-signatory  

is bound (and benefitted) by an arbitration agreement …  

include both purely consensual theories (e.g., agency,  

assumption, assignment) and nonconsensual theories (e.g.  

estoppel, alter ego)15”.  

Explaining the application of the alter ego principle in arbitration, Born notes:  

“Authorities from virtually all jurisdictions hold that a party  

who has not assented to a contract containing an arbitration  

clause may nonetheless be bound by the clause if that party  

is an “alter ego” of an entity that did execute, or was  

otherwise a party to, the agreement. This is a significant,  

                                                           13 Id.2.41 page 100  14 (24th Ed.), 3-025 pages 110-111  15 2nd Ed. Volume 1 page 1418

24    

but exceptional, departure from “the fundamental  

principle ... that each company in a group of companies (a  

relatively modern concept) is a separate legal entity  

possessed of separate rights and liabilities16.”  

Explaining  group of companies doctrine, Born states :  

“the doctrine provides that a non-signatory may be bound  

by an arbitration agreement where a group of companies  

exists and the parties have engaged in conduct (such as  

negotiation or performance of the relevant contract) or  

made statements indicating the intention assessed  

objectively and in good faith, that the non-signatory be  

bound and benefitted by the relevant contracts.17”  

While the alter ego principle is a rule of law which disregards the effects of  

incorporation or separate legal personality, in contrast the group of companies doctrine  

is a means of identifying the intentions of parties and does not disturb the legal  

personality of the entities in question. In other words :   

“the group of companies doctrine is akin to principles of  

agency or implied consent, whereby the corporate  

affiliations among distinct legal entities provide the  

foundation for concluding that they were intended to be  

parties to an agreement, notwithstanding their formal status  

as non-signatories.18”     

20 The decision in Indowind arose from an application under Section 11 of  

the Arbitration and Conciliation Act 1996.  Indowind was not a signatory to the  

contract and was held not to be a party to the agreement to refer disputes to  

arbitration.  Indowind held that an application under Section 11 was not  

maintainable. The present case does not envisage a situation of the kind which  

                                                           16 Id at page 1432  17 Id at pages 1448-49  18 Id at page 1450

25    

prevailed before this Court in Indowind. The present case relates to a post  

award situation. The enforcement of the arbitral award has been sought against  

the appellant on the basis that it claims under KCP and is bound by the award.  

Section 35 of the Arbitration and Conciliation Act 1996 postulates that an  

arbitral award “shall be final and binding on the parties and persons  

claiming under them respectively”. The expression ‘claiming under’, in its  

ordinary meaning, directs attention to the source of the right.  The expression  

includes cases of devolution and assignment of interest (Advanced Law  

Lexicon by P Ramanatha Aiyar19).  The expression “persons claiming under  

them” in Section 35 widens the net of those whom the arbitral award binds.  It  

does so by reaching out not only to the parties but to those who claim under  

them, as well.  The expression “persons claiming under them” is a legislative  

recognition of the doctrine that besides the parties, an arbitral award binds  

every person whose capacity or position is derived from and is the same as a  

party to the proceedings.  Having derived its capacity from a party and being in  

the same position as a party to the proceedings binds a person who claims  

under it. The issue in every such a case is whether the person against whom  

the arbitral award is sought to be enforced is one who claims under a party to  

the agreement.    

                                                           19 Third Edition, Volume I Page 818

26    

21 Mr Sibal has sought to make a distinction between the provisions of  

Section 45 and the unamended Section 8.  Section 45, forms a part of Part II  

dealing with the enforcement of foreign awards to which the New York  

Convention applies. It contemplates a reference by a judicial authority to  

arbitration at the request of one of the parties ‘or any person claiming through  

or under him’, where there is an arbitration agreement. The submission of Mr  

Sibal is that a similar expression (‘any person claiming through or under him’)  

has been introduced in the amended provisions of Section 8 (substituted by Act  

3 of 2016 with effect from 23 October 2015) but that this expression did not find  

place in the  unamended provision.  The submission is a non-sequitur. Both  

Sections 8 and 45 operate in the sphere of the duty of a judicial authority to  

refer parties to arbitration. In the present case Section 35 is the material  

provision, which expressly stipulates that an arbitral award is, final and binding  

not only on the parties but on persons claiming under them.   

22 The submission which was urged on behalf of the appellant, proceeds on  

the basis that since the appellant was not impleaded as a party to the arbitral  

proceedings, proceedings for the enforcement of the award will not lie against  

it.  This line of submissions clearly misses the central facet of Section 35, which  

is that a person who claims under a party is bound by the award.  The fact that  

the appellant was not a party to the arbitral proceedings will not conclude the  

question as to whether the award can be enforced against it on the ground that  

it claims under a party. Essentially, the Court is called upon to consider whether

27    

the test embodied in Section 35 is fulfilled in the present case, so as to bind the  

appellant.   

23 Under the agreement dated 19 July 2004, KCP was to be offered 243  

lakh equity shares of KSL for a consideration of Rs 2.31 crores. The intent of  

the parties, as evinced in clause 6 of the agreement, was that KCP would take  

over the business, assets and liabilities of SPIL. KCP was to discharge those  

liabilities of SPIL which were specified in Schedules 2 and 3 of the agreement.   

Clause 14 of the agreement recognises, on the part of KSL, the right of KCP to  

sell or transfer his holding in SPIL “provided the proposed transferees accept  

the terms and conditions mentioned in this agreement” for the management of  

SPIL and related financial aspects covered by this agreement. Significantly, on  

17 August 2004, KCP addressed a letter to KSL acting as the authorised  

signatory of the appellant.  The letter contains a clear and categoric reference  

to the Share Purchase Agreement dated 19 July 2004.  The appellant intimated  

to KSL that it was in pursuance of the said agreement that KSL had agreed to  

sell and “our group of companies by this agreement and/or by themselves  

and/or by their nominees have agreed to purchase shares” in SPIL of a face  

value of Rs 2430 lakhs for a sum of Rs 2.43 crores.  Accordingly, the appellant  

indicated that it was remitting seven share transfer deeds duly executed and  

requested KSL to lodge them, upon execution, with SPIL.  The parties in whose  

favour the transfers were to be registered were described as group companies.  

28    

It was indicated that a supplementary agreement would be drawn up to reflect  

the altered consideration.  

24 The record establishes that the transfer of shares by KCP to his  

nominees was to be on the express condition that the nominee would abide by  

the terms of the agreement in relation to the take over of the management of  

SPIL and related financial aspects.  The appellant, while purchasing the shares,  

was not merely aware of the agreement dated 19 July 2004 but expressly  

sought the allotment of shares in pursuance to it, to its group companies. In this  

background, it will not be open to the appellant to contend that while it was  

bound by all other terms of the agreement dated 19 July 2004, it would not be  

bound by the arbitration agreement contained in the very same agreement.  The  

arbitral award, as we have noticed, attained finality after all attempts to raise  

objections to it failed before the High Court and, later, before this Court.  The  

appellant, in purchasing the shares, was conscious of and accepted the terms  

of the agreement dated 19 July 2004.  Its letter dated 17 August 2004 leaves  

no manner of doubt of the acceptance of this position.      

25 The appellant questions the application of the Chloro Controls doctrine.   

Dr Singhvi urged that in Chloro Controls there was a joint venture agreement;  

the mother or parent agreement contained an arbitration clause and though the  

ancillary agreements did not contain an arbitration agreement, they could not  

have been performed in the absence of the mother agreement. The submission

29    

proceeds on a constricted interpretation of the Chloro Controls dictum. The  

principle which underlies Chloro Controls is that an arbitration agreement  

which is entered into by a company within a group of companies may bind non-

signatory affiliates, if the circumstances are such as to demonstrate the mutual  

intention of the parties to bind both signatories and non-signatories. In applying  

the doctrine, the law seeks to enforce the common intention of the parties,  

where circumstances indicate that both signatories and non-signatories were  

intended to be bound. In Duro (supra), the case was held to stand on a different  

footing since all the five different packages as well as the corporate guarantee  

did not depend on the terms and conditions of the original package nor on the  

memorandum of understanding executed between the parties. The judgment in  

Duro does not detract from the principle which was enunciated in Chloro  

Controls.  

26 In the present case, as we have seen, the parent agreement dated 19  

July 2004 envisaged the allotment of equity shares of KSL to KCP with the  

intent that KCP would take over the business, assets and liabilities of SPIL.   

While KCP was entitled to transfer his shareholding, this was expressly subject  

to the condition of the acceptance by the transferee of the terms and conditions  

of the agreement.  KCP’s  letter dated 17 August 2004 to KSL contains a  

specific reference to the share purchase agreement dated 19 July 2004.  It was  

in pursuance of that agreement that KCP indicated, as authorised signatory of  

the appellant, that his group of companies had agreed to purchase the shares

30    

in SPIL.  The shares were to be purchased by several entities in the same  

group. A supplementary agreement was to be entered into, to reflect the altered  

consideration.  Eventually, no supplementary agreement was executed and the  

transaction was structured on the basis of the parent agreement dated 19 July  

2004 which the appellant recognised in its letter dated 17 August 2004.  Having  

regard to this factual context, the defence of the appellant against the  

enforcement of the award cannot be accepted.  To allow such a defence to  

prevail would be to cast the mutual intent of the parties to the winds and to put  

a premium on dishonesty.   

27 The arbitral award envisaged that KSL was entitled to the return of  

documents of title and the certificates pertaining to the shares of SPIL  

contemporaneously with the payment or tendering of a sum of Rs 3.58 crores  

together with interest. KSL is in terms of the arbitral award entitled to the share  

certificates. That necessarily means the transfer of the share certificates. To  

effectuate the transfer, recourse to the remedy of the rectification of the register  

under Section 111 was but appropriate and necessary. The arbitral award has  

the character of a decree of a civil court under Section 36 and is capable of  

being enforced as if it were a decree. Armed with that decree, KSL was entitled  

to seek rectification before the NCLT by invoking the provisions of Section 111  

of the Companies Act, 1956. There can be, therefore, no question about the  

jurisdiction of NCLT to pass an appropriate order directing rectification of the  

register.

31    

28 We have not been impressed with the submission that the application by  

KSL to the NCLT was not maintainable since the Tribunal has no power to  

execute an arbitral award.  The submission proceeds on finding of the Tribunal  

that the purpose of the petition before it was to implement the award dated 16  

December 2009 and that its ultimate direction is to the same effect.  The  

submission relies on the provisions of Section 42 of the 1996 Act which  

provides as follows:  

“42. Jurisdiction. -Notwithstanding anything contained  

elsewhere in this Part or in any other law for the time being in  

force, where with respect to an arbitration agreement any  

application under this Part has been made in a court, that court  

alone shall have jurisdiction over the arbitral proceedings and  

all subsequent applications arising out of that agreement and  

the arbitral proceedings shall be made in that court and in no  

other court.”  

While dealing with the submission it is necessary to note that the award of the  

arbitral tribunal mandates that the appellant must return the share certificates  

relating to 2.43 crore shares of SPIL which were handed over in terms of the  

agreement dated 19 July 2004 against the payment of the consideration  

stipulated in the award.  The transfer of the share certificates by the appellant  

will be effectual only by the rectification of the register of the company.  The  

mere handing over of a share certificates will not constitute due implementation  

of the award. The award contemplates the transmission of the shares which  

stood in the name of the appellant in pursuance of the agreement dated 19 July  

2004, to the claimant in the arbitral proceedings.  This necessitated an  

application under Section 111 for the purpose of securing a rectification of the

32    

register.  Sub-section 4 of Section 111 deals with a situation where a default is  

made in entering in the register, the fact of any person having become a  

member of the company.  Under sub-section 5 while hearing the appeal, the  

Tribunal is entitled to direct that the transfer or transmission shall be registered  

by the company and to order rectification of the register.   

29 In the present case, the arbitral award required the shares to be  

transmitted to the claimants.  The arbitral award attained finality.  The award  

could be enforced in accordance with the provisions of the Code of Civil  

Procedure, in the same manner as if it were a decree of the Court.  The award  

postulates a transmission of shares to the claimant. The directions contained in  

the award can be enforced only by moving the Tribunal for rectification in the  

manner contemplated by law.   

30 The reliance which has been sought to be placed on the provisions of  

Section 42 of the 1996 Act is inapposite. Dr Singhvi relied on the decision in  

State of West Bengal v Associated Contractors20.  The principle which was  

enunciated in the judgment of this Court was as follows:  

“If an application were to be preferred to a court which is not a  

Principal Civil Court of original jurisdiction in a district or a High  

Court exercising original jurisdiction to decide questions  

forming the subject matter of an arbitration if the same had  

been the subject matter of a suit, then obviously such  

application would be outside the four corners of Section 42. If,  

for example, an application were to be filed in a court inferior  

to a Principal Civil Court, or to a High Court which has no  

                                                           20 (2015) 1 SCC 32.   

33    

original jurisdiction, or if an application were to be made to a  

court which has no subject-matter jurisdiction, such application  

would be outside Section 42 and would not debar subsequent  

applications from being filed in a court other than such court.”  

The conclusion of the Court is in the following terms:  

“(a) Section 2(1)(e) contains an exhaustive definition marking out only  

the Principal Civil Court of Original Jurisdiction in a district or a High  

Court having original civil jurisdiction in the State, and no other court  

as “court” for the purpose of Part I of the Arbitration Act, 1996.  

(b) The expression “with respect to an arbitration agreement” makes it  

clear that Section 42 will apply to all applications made whether before  

or during arbitral proceedings or after an award is pronounced under  

Part I of the 1996 Act.  

(c) However, Section 42 only applies to applications made under Part  

I if they are made to a court as defined. Since applications made under  

Section 8 are made to judicial authorities and since applications under  

Section 11 are made to the Chief Justice or his designate, the judicial  

authority and the Chief Justice or his designate not being court as  

defined, such applications would be outside Section 42.  

(d) Section 9 applications being applications made to a court and  

Section 34 applications to set aside arbitral awards are applications  

which are within Section 42.  

(e) In no circumstances can the Supreme Court be “court” for the  

purposes of Section 2(1)(e), and whether the Supreme Court does or  

does not retain seisin after appointing an arbitrator, applications will  

follow the first application made before either a High Court having  

original jurisdiction in the State or a Principal Civil Court having original  

jurisdiction in the district, as the case may be.  

(f) Section 42 will apply to applications made after the arbitral  

proceedings have come to an end provided they are made under Part  

I.  

(g) If a first application is made to a court which is neither a Principal  

Court of Original Jurisdiction in a district or a High Court exercising  

original jurisdiction in a State, such application not being to a court as  

defined would be outside Section 42. Also, an application made to a  

court without subject-matter jurisdiction would be outside Section 42.”  

31 More recently in Sundaram Finance Limited v Abdul Samad21, this  

Court considered the divergence of legal opinion in the High Courts on the  

                                                           21 (2018) 2 SCALE 467

34    

question as to whether an award under the 1996 Act is required to be first filed  

in the Court having jurisdiction over the arbitral proceedings for execution, to  

be followed by a transfer of the decree or whether the award could be filed and  

executed straight-away in the Court where the assets are located. Dealing with  

the provisions of Section 36, Justice Sanjay Kishan Kaul observed thus:  

“The aforesaid provision would show that an award is to be  

enforced in accordance with the provisions of the said code in  

the same manner as if it were a decree. It is, thus, the  

enforcement mechanism, which is akin to the enforcement of  

a decree but the award itself is not a decree of the civil court  

as no decree whatsoever is passed by the civil court. It is the  

arbitral tribunal, which renders an award and the tribunal does  

not have the power of execution of a decree. For the purposes  

of execution of a decree the award is to be enforced in the  

same manner as if it was a decree under the said Code.”  

Explaining the provisions of Section 42 the Court held that:  

“The aforesaid provision, however, applies with respect to an  

application being filed in Court under Part I. The jurisdiction is  

over the arbitral proceedings. The subsequent application  

arising from that agreement and the arbitral proceedings are to  

be made in that court alone. However, what has been lost sight  

of is Section 32 of the said Act, which reads as under: “32.  

Termination of proceedings.— (1) The arbitral proceedings  

shall be terminated by the final arbitral award or by an order of  

the arbitral tribunal under sub-section (2). (2) The arbitral  

tribunal shall issue an order for the termination of CIVIL  

APPEAL No.1650 of 2018 Page 17 of 21 the arbitral  

proceedings where— (a) the claimant withdraws his claim,  

unless the respondent objects to the order and the arbitral  

tribunal recognises a legitimate interest on his part in obtaining  

a final settlement of the dispute, (b) the parties agree on the  

termination of the proceedings, or (c) the arbitral tribunal finds  

that the continuation of the proceedings has for any other  

reason become unnecessary or impossible. (3) Subject to  

section 33 and sub-section (4) of section 34, the mandate of  

the arbitral tribunal shall terminate with the termination of the  

arbitral proceedings.”

35    

19.The aforesaid provision provides for arbitral proceedings to  

be terminated by the final arbitral award. Thus, when an award  

is already made, of which execution is sought, the arbitral  

proceedings already stand terminated on the making of the  

final award. Thus, it is not appreciated how Section 42 of the  

said Act, which deals with the jurisdiction issue in respect of  

arbitral proceedings, would have any relevance..”  

Consequently, in the view of the Court, the enforcement of an award through  

its execution can be initiated anywhere in the country where the decree can be  

executed and there is no requirement of obtaining a transfer of the decree from  

the Court which would have jurisdiction over the arbitral proceedings.  

32 In the present case, the arbitral award, in essence, postulates the  

transmission of shares from the appellant to the claimant.  The only remedy  

available for effectuating the transmission is that which was provided in Section  

111 for seeking a rectification of the register.  There is, therefore, no merit in  

the challenge addressed by the appellant.    

33 We may also note the fact that in the proceedings before the Madras  

High Court under Section 9, it was held that the purchase of shares by the  

appellant was as a nominee of KCP and not by way of an independent right.  

The purchase was held to be referable to the agreement dated 19 July 2004.  

There has been no challenge to this finding.  

The Madras High Court held thus:  

“The reading of the letter issued by the third respondent  

seeking transfer and registration of shares shown that

36    

reference was made to the agreement dated 19.7.2004 which  

was in dispute before the Arbitration Tribunal. Nothing has  

been produced on record to show, if any fresh agreement was  

executed as suggested in the letter, seeking transfer of shares  

in favour of the person mentioned in the letter written by the  

third respondent, nor any documents have been placed on  

record to show as to whether the respondent took over the  

liabilities, which were met by the applicant, and finally held to  

be binding on first respondent.  

In the absence of execution of new agreement, no other  

conclusion then the one that the transaction was in terms of the  

agreement, entered into between the parties to arbitration can  

be arrived at.”  

..  

“At the sake of repetition, it may be mentioned that the reading  

of the letter dated 18.8.2004 on which reliance was placed by  

the third respondent shows that clear reference was made to  

the agreement dated 19.7.2004 entered into between the  

applicant and the first respondent.”  

The High Court further held thus:  

“The respondents 3 to 6 have purchased the shares, as  

nominees of the first respondent and not as of independent  

right. No material other than the agreement dated 19.7.2004  

has been placed on record to show that the respondents 3 to  

6 exercises their independent right to purchase the shares.”  

..  

“The contention of Mr. V. Prakash, learned Senior counsel that  

the respondents 4 to 6 cannot be treated as nominees of the  

first respondent cannot be sustained, as shares were  

transferred, in pursuance to the letter dated 18.8.2004  

addressed by the third respondent, for registration of the  

transfer deed by referring to the agreement dated 19.7.2004.  

Thus, the second question is also answered by holding that the  

respondents 2 to 6 purchased the shares, as the nominees of  

the first respondent.”  

We have referred to the above findings for the completeness of the record.   

These findings of the Madras High Court would indicate that virtually everyone  

of the submission which was urged before this Court have been negatived.  

37    

34 Finally, having covered the entire gamut of submissions which were  

urged on behalf of the appellant, it would be worthwhile to revisit the  

fundamental principles which were formulated nearly fifty years ago in a  

judgment of a three judge Bench of this Court in Satish Kumar v Surinder  

Kumar22. That case arose under the provisions of the Indian Arbitration Act  

1940.  The question which arose before this Court was whether an award under  

the Act requires registration under Section 17(1)(b) of the Registration Act, if it  

effects partition of immovable property above the value of Rs 100.  A Full Bench  

of the Patna High Court held that unless a decree is passed in terms of the  

award (in terms of the position as it stood under the 1940 Act) it had no legal  

effect. In holding thus, the Patna High Court had relied upon a Punjab Full  

Bench decision holding that under the Arbitration Act 1940, an award was  

effective only when a decree follows a judgment on the award. The Punjab Full  

Bench held that even if the award is registered, it is still a ‘waste paper’ unless  

it is made a rule of the court. In appeal, this Court held that the two Full Benches  

had taken a view contrary to that formulated in an unreported decision of this  

Court in Uttam Singh Duggal & Co v Union of India23 where it was held thus:   

“The true legal position in regard to the effect of an award is  

not in dispute. It is well settled that as a general rule, all claims  

which are the subject-matter of a reference to arbitration merge  

in the award which is pronounced in the proceedings before  

the arbitrator and that after an award has been pronounced,  

the rights and liabilities of the parties in respect of the said  

claims can be determined only on the basis of the said award.  

After an award is pronounced, no action can be started on the  

original claim which had been the subject-matter of the  

reference. As has been observed by Mookerjee, J., in the  

                                                           22 (1969) 2 SCR 244  23 Civil Appeal No 162 of 1962 – judgment delivered on 11 October 1962

38    

case of Bhajahari Saha Banikya v. Behary Lal Basak [33  

Col 881 at p 898] the award is, in fact, a final adjudication  

of a Court of the parties own choice, and until impeached  

upon sufficient grounds in an appropriate proceeding, an  

award, which is on the fact of it regular, is conclusive upon  

the merits of the controversy submitted, unless possibly  

the parties have intended that the award shall not be final  

and conclusive … in reality, an award possesses all the  

elements of vitality, even though it has not been formally  

enforced, and it may be relied upon in a litigation between  

the parties relating to the same subject-matter”. This  

conclusion, according to the learned Judge, is based upon the  

elementary principle that, as between the parties and their  

privies, an award is entitled to that respect which is due to  

the judgment of a court of last resort. Therefore, if the award  

which has been pronounced between the parties has in fact, or  

can, in law, be deemed to have dealt with the present dispute,  

the second reference would be incompetent. This position also  

has not been and cannot be seriously disputed.”  

(emphasis supplied)  

The above position was followed in Satish Kumar (supra) as stating a binding  

principle of law.  The earlier decision was reiterated in the following  

observations:  

“In our opinion this judgment lays down that the position  

under the Act is in no way different from what it was before  

the Act came into force, and that an award has some legal  

force and is not a mere waste paper. If the award in question  

is not a mere waste paper but has some legal effect it plainly  

purports to or affects property within the meaning of Section  

17(1)(b) of the Registration Act.”  

(emphasis supplied)  

The present case which arises under the Arbitration and Conciliation Act 1996  

stands on even a higher pedestal.  Under the provisions of Section 35, the  

award can be enforced in the same manner as if it were a decree of the Court.  

The award has attained finality.  The transmission of shares as mandated by

39    

the award could be fully effectuated by obtaining a rectification of the register  

under Section 111 of the Companies Act.  The remedy which was resorted to  

was competent.  The view of the NCLT, which has been affirmed by the NCLAT  

does not warrant interference.  

35 For the above reasons, we are of the view that the appeals are lacking in  

merit. The appeals shall stand dismissed.     

...........................................CJI                  [DIPAK MISRA]      

                                                    ...........................................J                  [A M KHANWILKAR]  

                                                          ...........................................J  

               [Dr D Y CHANDRACHUD]  New Delhi;  April 24, 2018