Holding

An arbitral award is final and binding on the parties and on persons claiming under them under Section 35, so the award could be enforced against the appellant nominee and the NCLT’s rectification order under Section 111 was proper.

Summary

The dispute arose from a share purchase agreement where KCP and its nominees, including Cheran Properties Limited (the appellant), were to acquire shares of SPIL from KSL. The parties later entered arbitration, which awarded KSL the return of share documents and payment of Rs 3.58 crore. The award attained finality, and KSL sought rectification of SPIL's register under Section 111 of the Companies Act, 1956, which the NCLT ordered and the NCLAT affirmed. The appellant challenged the enforcement, arguing it was not a signatory to the arbitration agreement and that the NCLT lacked jurisdiction. The Supreme Court examined whether Section 35 of the Arbitration and Conciliation Act, 1996 binds persons claiming under a party, applied the group‑of‑companies doctrine, and held that the appellant, as a nominee of KCP, was bound by the arbitration agreement. Consequently, the award could be enforced like a civil decree, and the NCLT’s rectification order was valid. The appeals were dismissed.

Issues considered

The applicability of Section 35 of the Arbitration and Conciliation Act, 1996 to bind a non‑signatory nominee of a party to an arbitral award.
Whether the arbitration agreement in the share purchase contract binds the appellant under the group‑of‑companies doctrine.
Whether the National Company Law Tribunal has jurisdiction to order rectification of the register under Section 111 of the Companies Act, 1956 for enforcement of the award.
Whether Section 42 of the Arbitration and Conciliation Act, 1996 bars the NCLT from executing the award.
Whether the appellant is a nominee of KCP and thus claims under KCP for purposes of Section 35.

Legislation cited

Arbitration and Conciliation Act, 1996s. 34, s. 35, s. 36, s. 42, s. 45, s. 7, s. 8, s. 9
Companies Act, 1956s. 111
Companies Act, 2013s. 423

Subjects

ArbitrationArbitral award enforcementNon‑signatoryGroup of companies doctrineSection 35Section 111Companies ActNCLT jurisdictionNomineeArbitration agreement

Judgment

[2018] 4 S.C.R. 1063 1063

CHERAN PROPERTIES LIMITED A
v.
KASTURI AND SONS LIMITED AND ORS.
(Civil Appeal Nos. 10025-10026 OF 2017)
APRIL 24, 2018
B
[DIPAK MISRA, CJI, A. M. KHANWILKAR AND
DR. D. Y. CHANDRACHUD, JJ.]
Arbitration and Conciliation Act, 1996: ss. 35, 36, 7 – Finality
of awards – Enforcement – Arbitration agreement – Binding on third
parties who may not be signatories to an agreement between two
C
contracting parties – Held: Section 35 postulates that an arbitral
award “shall be final and binding on the parties and persons
claiming under them respectively – 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 D
proceedings – Furthermore, arbitral award has the character of a
decree of a civil court u/s. 36 and is capable of being enforced as if
it were a decree – On facts, dispute between parties resulting in
commencement of arbitral proceedings wherein arbitral award
passed – Said award could be enforced against appellant company-
nominee even though appellant was not signatory to the arbitration E
proceedings – Arbitral award requiring transmission of shares,
having attained finality, could be enforced in the same manner as if
it were a decree of the court – Further, the transmission of shares to
the claimants as mandated by the award could be fully effectuated
by obtaining rectification of the register before NCLT by invoking F
provision of s. 111 – NCLT rightly exercised the jurisdiction to pass
an order directing rectification of the register which was upheld by
NCLAT – Thus, no merit in the challenge raised by the appellant –
Companies Act, 1956 – s. 111.
KCP-third respondent, KSL-first respondent, SPIL and G
HRP company entered into an agreement whereby, SPIL was to
allot 240 lakh equity shares to KSL against the book debts due
by it to KSL. KSL offered to sell the shares to KCP. KCP agreed
to take over the business, shares and liabilities of SPIL and would
discharge the liabilities. However, KCP did not complete the
transaction. Disputes arose between the parties resulting in H
1063
1064 SUPREME COURT REPORTS [2018] 4 S.C.R.

A arbitral proceedings. An award was passed directing KCP and
SPIL to return documents of title and share certificates relating
to 2.43 crore shares to KSL and KSL would pay or tender a sum
of Rs. 3.58 crores with interest. The said award attained finality.
KSL then initiated proceedings u/s. 111 of the Companies Act,
1956 for rectification of the register of SPIL. NCLT allowed the
B
petition. Thereafter, NCLAT held that the appellant is a nominee
of KCP and holds the shares in question, hence, NCLT was
justified in entertaining the proceedings for rectification u/s. 111.
Hence the present appeals.
Dismissing the appeals, the Court
C HELD: 1.1 The 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 signatory and non-signatory entities within the same
D 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
E 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
F 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. [Para 17]
[1083-C-F]
International Arbitration by Redfern and Hunter, Fifth
G
Edn 2.13, p.89-90, 99, 2.40 p 100, 2.41 p 100; Russel
on Arbitration 24th Edn, 3-025 pages 110-111; Treatise
on International Commercial Arbitration by Garry B
Born 2nd Ed. Volume 1 p 1418 - referred to.
1.2 The instant case relates to a post award situation. The
H enforcement of the arbitral award has been sought against the
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1065
LIMITED AND ORS.

appellant on the basis that it claims under KCP and is bound by A
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
B
of devolution and assignment of interest. 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, C
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
D
against whom the arbitral award is sought to be enforced is one
who claims under a party to the agreement. [Para 20] [1086-D-G]
Advanced Law Lexicon by P Ramanatha Aiyar Third
Edn Volume I p 818 – referred to.
1.3 The fact that the appellant was not a party to the arbitral E
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
the test embodied in s. 35 is fulfilled, so as to bind the appellant.
[Para 22] [1087-E]
F
1.4 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.
KCP addressed a letter to KSL acting as the authorised signatory G
of the appellant. The letter contained a clear and categoric
reference to the Share Purchase Agreement. 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 H
1066 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 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. It was indicated
B
that a supplementary agreement would be drawn up to reflect
the altered consideration. [Para 23] [1087-G-H; 1088-A-C]
1.5 The record established 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
C 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 but expressly sought the allotment
of shares in pursuance to it, to its group companies. In this
background, it would not be open to the appellant to contend
D that while it was bound by all other terms of the agreement, it
would not be bound by the arbitration agreement contained in
the very same agreement. The arbitral award 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
E agreement. Its letter leaves no manner of doubt of the acceptance
of this position. [Para 24] [1088-C-E]
1.6 The parent agreement 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
F 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 to KSL contains a
specific reference to the share purchase agreement. It was in
pursuance of that agreement that KCP indicated, as authorised
G signatory of the appellant, that his group of companies had agreed
to purchase the shares 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
H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1067
LIMITED AND ORS.

which the appellant recognised in its letter. Having regard to A
this factual context, the defence of the appellant against the
enforcement of the award cannot be accepted. [Para 26] [1089-B-E]
1.7 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 B
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 C
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 D
appropriate order directing rectification of the register. [Para 27]
[1089-F-H; 1090-A]
1.8 The submission that the application by KSL to the NCLT
was not maintainable since the tribunal has no power to execute
an arbitral award, cannot be accepted. The submission proceeds E
on finding of the tribunal that the purpose of the petition before it
was to implement the award and that its ultimate direction is to
the same effect. The submission relies on the provisions of Section
42 of the 1996 Act. 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 F
handed over in terms of the agreement 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 G
of the award. The award contemplates the transmission of the
shares which stood in the name of the appellant in pursuance of
the agreement, to the claimant in the arbitral proceedings. This
necessitated an application under Section 111 for the purpose of
securing a rectification of the register. [Para 28] [1090-B, D-G]
H
1068 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 1.9 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 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
B
of the NCLT, which has been affirmed by the NCLAT does not
warrant interference. There is, therefore, no merit in the
challenge addressed by the appellant. [Paras 34-35] [1096-G-H;
1097-A-B]
Indowind Energy Limited v. Wescare (India) Limited
C (2010) 5 SCC 306 : [2010] 5 SCR 284 - distinguished.
S.N.Prasad, Hitek Industries (Bihar) Limited v. Monnet
Finance Limited (2011) 1 SCC 320 : [2010] 13 SCR
207; Chloro Controls India Private Limited v. Severn
Trent Water Purification Inc. (2013) 1 SCC 641 : [2012]
D 13 SCR 402; Duro Felguera, S.A. v Gangavaram Port
Limited (2017) 9 SCC 729; State of West Bengal v.
Associated Contractors (2015) 1 SCC 32 : [2014] 10
SCR 426; Sundaram Finance Limited v. Abdul Samad
(2018) 2 SCALE 467; Satish Kumar v Surinder Kumar
[1969] 2 SCR 244; Uttam Singh Duggal & Co v. Union
E of India Civil Appeal No 162 of 1962 decided on
11.10.1962 – referred to.
Case Law Reference
[2010] 5 SCR 284 distinguished Para 20
[2010] 13 SCR 207 referred to Para 8
F [2012] 13 SCR 402 referred to Para 9
(2017) 9 SCC 729 referred to Para 9
[2014] 10 SCR 426 referred to Para 30
(2018) 2 SCALE 467 referred to Para 31
[1969] 2 SCR 244 referred to Para 34
G
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 10025-
10026 of 2017.
From the Judgment and Order dated 05.07.2017 and 18.07.2017
of the National Company Law Appellate Tribunal at New Delhi in
Company Appeal (AT) No.125 of 2017 and in I.A. No.368 of 2017 in
H Company Appeal (AT) No.125 of 2017 respectively.
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1069
LIMITED AND ORS.

Dr. A.M. Singhvi, Sr. Adv., Abhinav Shrivastava, Avishkar Singhvi, A
Kartik Seth, Naveen Dahiya, Ms. Anisha Mahajan, Vabhiv Mishra, Rahul
Gupta, Advs. for the Appellant.
Mukul Rohatgi, Arvind P. Datar, Vikas Singh, Sr. Advs.,
Ms. Haripriya Padmanabhan, Ms. Pooja Dhar, Rohan George, Shrutanjay
Bhardwaj, Anandh Kannan N., Advs. for the Respondents. B
The Judgment of the Court was delivered by
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 Tribunal 1
dated 18 July 2017. The NCLAT has dismissed an appeal filed against C
an order dated 6 March 2017 of the National Company Law Tribunal 2 at
its Chennai Bench.
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 Limited 4. On D
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 E
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 F
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 G
choice, provided the proposed transferees accept the terms and
1
NCLAT
2
NCLT
3
SPIL
4
KSL
5
KCP H
1070 SUPREME COURT REPORTS [2018] 4 S.C.R.

A conditions mentioned in this agreement for the management of
SPIL and related financial aspects covered by this agreement.”
The agreement contained the following provision for resolution of disputes
by arbitration:
“In the unlikely case of dispute arising out of this agreement
B 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
C 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
D
• 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.
E
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
F
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.
G Accordingly we send herewith seven Share Transfer Deeds duly
executed by us and we request you to execute the same and
lodge them with Sporting Pastime India Limited together with
relevant Share Certificates for registering the transfers in the
Following names :

H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1071
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

1. C G Holdings (P) Ltd. A
2. Cheran Holdings P Ltd.
3. KCP Associates Holdings P. Ltd
4. Mr K C Palanisomi
5. Cheraan Properties Limited B
6. Cherraan Properties Limited 242,99.994
7. Cherraan Properties Limited
Total 243.00.000
C
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 D
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 E
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 F
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
G
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
H
1072 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 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 :
(a) The documents of title relating to the second claimant being
B 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 /
C 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
D 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
E 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
F 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
G 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 Petition challenging the judgment
of the Division Bench on 10 February 2017. The award has attained
H finality.
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1073
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

5. KSL initiated proceedings, inter alia, under Section 111 of the A
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 B
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. C
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; D

(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.”
The High Court came to the conclusion that clause 14 of the agreement E
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 F
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 G
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.
H
1074 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 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;
B 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;
C
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;
D 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
E 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 paid
valuable consideration for the shares purchased by it. KSL
F 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
G
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
6
(2010) 5 SCC 306
7
(2011) 1 SCC 320
H 8
(2013) 1 SCC 641
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1075
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

party to the arbitration agreement and having paid consideration A
for its purchase of shares, is not bound by the arbitral award;
Thirdly, the decision in Chloro Controlshas been clarified
by this Court in Duro Felguera, S.A. v Gangavaram Port
Limited9.
10. Dr Abhishek Manu Singhvi has in his submissions addressed B
the Court on the following propositions.
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; C
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; D
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 E
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; F
Sixthly, during the course of the proceedings under Section 9,
counsel for the appellant had conceded that the expression ‘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, G
the following requirements are necessary:
(a) there has to be a joint venture agreement;
(b) there must be a mother agreement;
9
(2017) 9 SCC 729 H
1076 SUPREME COURT REPORTS [2018] 4 S.C.R.

A (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.
B
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
C 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;
D
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
E
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
F
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
G 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
H company, which is an affiliate of a signatory to the arbitration
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1077
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

agreement has been settled in a judgment of a three judge bench A
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 B
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 C
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, D
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;
E
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; F
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,theconsequence of the arbitral award is to envisage a
G
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
H
1078 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 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
B thus:
“7 Arbitration agreement. —
(1) In this Part, “arbitration agreement” means an agreement by
the parties to submit to arbitration all or certain disputes which
C 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.
D
(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
E (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
F 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
G
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
H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1079
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

the promoter of Indowind. Under the agreement, the seller agreed to A
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 between it and S and
B
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. C
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 D
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 E
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 F
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 G
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 and the mere fact that the companies had common
shareholders or a common Board of Directors will not make them a
H
1080 SUPREME COURT REPORTS [2018] 4 S.C.R.

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
B 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
C 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
D 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
E 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
F agreement as defined under Section 7(4)(a) of the Act in regard
to the second and third respondents..”
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:
G “..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
H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1081
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

arbitration or appointment of arbitrator can be only with respect A
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 B
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: C

“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 D
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 E
number of arbitrations so as to justify a tribunal taking jurisdiction
over a party who is not a 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 F
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.” G
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: H
1082 SUPREME COURT REPORTS [2018] 4 S.C.R.

A “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
B
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
C 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.”
D 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
mechanisms of contractual rights. This theory relies on the
E 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
F 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
G 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.”
H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1083
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

The position in Indowind was formulated by a Bench of two Judges A
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
B
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 C
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 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 D
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 E
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. F
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 G
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
H
1084 SUPREME COURT REPORTS [2018] 4 S.C.R.

A in writing is an elucidation of the principle that the existence of such an
agreement should 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
B 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:
C “..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
D ‘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
E 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
F of corporate 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
G the process, either by agreeing in their contract to refer any
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
13
Id.2.41 page 100
14
H (24th Ed.), 3-025 pages 110-111
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1085
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

disputes arising in the future between them to arbitration or by A
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
B
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 C
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”. D
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 E
ego” of an entity that did execute, or was otherwise a party to,
the agreement. This is a significant, 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.”
F
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, G
that the non-signatory be bound and benefitted by the relevant
contracts.17”
15
2nd Ed. Volume 1 page 1418
16
Id at page 1432
17
Id at pages 1448-49 H
1086 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 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 :
B “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”
C 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 prevailed before this
D 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
E 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
F 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
G 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.
18
Id at page 1450
19
H Third Edition, Volume I Page 818
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1087
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

21. Mr Sibal has sought to make a distinction between the provisions A
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.
B
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 C
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 D
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 E
a party. Essentially, the Court is called upon to consider whether 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 F
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 G
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
H
1088 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 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
B
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. It was indicated that a supplementary agreement would
be drawn up to reflect the altered consideration.
C 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
D 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
E 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
F 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 proceeds on a
G 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
H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1089
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

of the parties, where circumstances indicate that both signatories and A
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
B
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 C
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 in SPIL. D
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 E
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 F
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 G
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
H
1090 SUPREME COURT REPORTS [2018] 4 S.C.R.

A the jurisdiction of NCLT to pass an appropriate order directing rectification
of the register.
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
B 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
C 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.”
D
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
E 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
F claimant in the arbitral proceedings. This necessitated an application
under Section 111 for the purpose of securing a rectification of the 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
G 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
H Court. The award postulates a transmission of shares to the claimant.
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1091
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

The directions contained in the award can be enforced only by moving A
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 B
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 C
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 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 D
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 E
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 F
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 G
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.
20
(2015) 1 SCC 32. H
1092 SUPREME COURT REPORTS [2018] 4 S.C.R.

A (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
B 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
C 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
D 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
E High Courts on the 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:
F
“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
G 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.”
H 21
(2018) 2 SCALE 467
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1093
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

Explaining the provisions of Section 42 the Court held that: A
“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 B
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 C
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 D
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.”
19. The aforesaid provision provides for arbitral proceedings to E
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..” F

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. G
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. H
1094 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 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.
B The Madras High Court held thus:
“The reading of the letter issued by the third respondent seeking
transfer and registration of shares shown that reference was
made to the agreement dated 19.7.2004 which was in dispute
before the Arbitration Tribunal. Nothing has been produced on
C 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.
D
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.”
..
E “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.”
F 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
G 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
H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1095
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

pursuance to the letter dated 18.8.2004 addressed by the third A
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 B
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.
34. Finally, having covered the entire gamut of submissions which
were urged on behalf of the appellant, it would be worthwhile to revisit C
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 D
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 E
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: F

“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 G
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
22
(1969) 2 SCR 244
23
Civil Appeal No 162 of 1962 – judgment delivered on 11 October 1962 H
1096 SUPREME COURT REPORTS [2018] 4 S.C.R.

A which had been the subject-matter of the reference. As has
been observed by Mookerjee, J., in the 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
B
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
C 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
D
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)
E
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
F 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.”
G
(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
H
CHERAN PROPERTIES LIMITED v. KASTURI AND SONS 1097
LIMITED AND ORS. [DR. D. Y. CHANDRACHUD, J.]

of shares as mandated by the award could be fully effectuated by A
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 B
are lacking in merit. The appeals shall stand dismissed.

Nidhi Jain Appeals dismissed.

C

D

E

F

G

H