Arbitration - A non-signatory to an arbitration agreement cannot be considered a veritable party

Supreme Court Overturns High Court Decision in Hindustan Petroleum Arbitration Case Non-Signatory BCL Secure Premises Pvt. Ltd. Cannot Invoke Arbitration Clause Against HPCL, Says Apex Court

In a significant ruling, the Supreme Court of India has set aside the Bombay High Court's order that had allowed BCL Secure Premises Pvt. Ltd. to initiate arbitration proceedings against Hindustan Petroleum Corporation Ltd. (HPCL). The apex court held that BCL, a non-signatory to the contract between HPCL and AGC Networks Ltd. (now known as Black Box Limited), could not be considered a party to the arbitration agreement.

The case, titled "Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd.," was decided by a bench comprising Justices J.B. Pardiwala and K.V. Viswanathan. The judgment was delivered on December 9, 2025, in Civil Appeal No. 14647 of 2025.

The controversy arose from a tender issued by HPCL for a Tank Truck Locking System (TTLS), which was awarded to AGC Networks Ltd. AGC, in turn, subcontracted the work to BCL without HPCL's consent. Disputes emerged over payment issues and project performance, leading BCL to invoke arbitration under the Arbitration and Conciliation Act, 1996, despite not being a direct party to the original contract with HPCL.

The Supreme Court emphasized the need for a prima facie demonstration that a non-signatory is a veritable party to the arbitration agreement, which BCL failed to establish. The court reiterated that mere commercial or legal connections do not suffice for a non-signatory to invoke arbitration through or under a signatory.

The decision underscores the principle that obligations under a contract cannot be assigned without the consent of the original promisee, reinforcing the sanctity of contract privity. The court's ruling protects HPCL from unwarranted arbitration proceedings and affirms its rights under the original contract terms with AGC.

Bottom Line:

Arbitration and Conciliation Act, 1996 - Referral court's jurisdiction under Section 11 - A non-signatory to an arbitration agreement cannot be considered a veritable party unless there is prima facie evidence of an intention to bind the non-signatory to the arbitration agreement.

Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 11

Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd., (SC) : Law Finder Doc Id # 2819626