Operational involvement alone does not make a non-signatory a party to an arbitration agreement.

The Applicant and Respondent No. 1 entered into a Service Provider Agreement dated 18 November 2022 containing an arbitration clause, and a Work Order for logistics and transportation services.

Respondent No. 2 was not a party to either document, but its employees allegedly received and misappropriated cash collected in connection with the commercial arrangement; the Applicant relied, among other things, on receipts, correspondence and an FIR concerning the alleged misappropriation.

After seeking payment and issuing a notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996, the Applicant applied under Section 11 for appointment of an arbitrator against both Respondents.

Respondent No. 1 disputed Mumbai as the arbitral location, relying on the Work Order’s Ahmedabad provision; Respondent No. 2 denied being bound by the arbitration agreement.

1. Whether an arbitration agreement existed between the Applicant and Respondent No. 1 and whether the conflicting Mumbai and Ahmedabad provisions prevented appointment under Section 11.

2. Whether Respondent No. 2, a non-signatory to the Service Provider Agreement, could prima facie be treated as a party to its arbitration agreement.

3. Whether the Court could appoint an arbitrator under Section 11 in the circumstances.

Section 11 of the Arbitration and Conciliation Act, 1996 empowers the Court to appoint an arbitrator where the statutory requirements are met; Section 21 governs commencement of arbitral proceedings by a request to refer the dispute to arbitration.

Under Cox & Kings Ltd. v. SAP India (P) Ltd., as discussed in HPCL v. BCL Secure Premises (P) Ltd., a non-signatory may be referred to arbitration only where the material prima facie supports treating it as a “veritable party” to the arbitration agreement; consent is central, and a mere commercial relationship or connection with a signatory is insufficient.

The referral court undertakes a limited examination of that question, leaving its final determination to the arbitral tribunal where appropriate.

The Court found that the Service Provider Agreement, executed by the Applicant and Respondent No. 1, contained an arbitration agreement and that the Applicant had invoked it.

Although the Work Order specified Ahmedabad while the Agreement specified Mumbai, this discrepancy did not negate the arbitration agreement invoked; the effect of the two provisions could be considered by the tribunal.

As to Respondent No. 2, the evidence showed operational involvement in cash collection and subsequent communications about the incident, but did not prima facie show that it accepted the Service Provider Agreement, consented to Clause 13.2, or entered a separate arrangement to arbitrate with the Applicant.

Alleged agency, receipt of cash, and the FIR could relate to the merits of a claim but did not establish consent to arbitration; convenience and avoidance of multiple proceedings could not substitute for consent.

The Application was disposed of by appointing Ms. Ayushi Anandpara Parekh as Sole Arbitrator to adjudicate disputes between the Applicant and Respondent No. 1 arising out of the Service Provider Agreement, including claims and counterclaims; the parties were directed to share arbitral costs and fees in the first instance.

The merits, including liability and the amount claimed, were kept open.