The Supreme Court of India, in a judgment delivered by Chief Justice Dr. Dhananjaya Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra, has emphasized that referral courts should not interfere in matters involving non-signatory parties to an arbitration agreement. Instead, such disputes should be left for determination by the arbitral tribunal. This decision was made while hearing Arbitration Petition No. 38 of 2020, filed by Cox & Kings Ltd. against SAP India Pvt. Ltd. and its parent company SAP SE GmbH (Germany).
Background of the Case
In Arbitration Petition No. 38 of 2020, Cox & Kings Ltd. (the petitioner), a leading company in tourism and hospitality, filed a petition under Section 11(6) and Section 11(12)(a) of the Arbitration & Conciliation Act, 1996, seeking the appointment of an arbitrator to adjudicate disputes with SAP India Pvt. Ltd. (respondent no. 1), a wholly-owned subsidiary of SAP SE GmbH (Germany) (respondent no. 2).
The dispute traces back to a SAP Software End User License Agreement entered into between the petitioner and respondent no. 1 in 2010, followed by several agreements in 2015 for the purchase, customization, and use of SAP’s ‘Hybris Solution’ software. Alleging failures in the implementation of the software, Cox & Kings initiated arbitration proceedings under the General Terms and Conditions Agreement signed between the parties.
Important Legal Issues and Court Observations
The central legal issue revolved around whether a non-signatory, respondent no. 2 (SAP SE GmbH, Germany), could be bound by the arbitration agreement. The Court underscored that while there was a prima facie existence of an arbitration agreement between Cox & Kings and SAP India, the question of involving a non-signatory should be left to the arbitral tribunal to decide, in line with the principles of the Arbitration & Conciliation Act, 1996. The Court reiterated the doctrine of “competence-competence,” affirming that arbitral tribunals have the authority to rule on their own jurisdiction, including issues related to non-signatory parties.
Quoting the judgment, the Court observed: “The referral court should not unnecessarily interfere with arbitration proceedings, and rather allow the Arbitral Tribunal to exercise its primary jurisdiction.”
Decision of the Court
The Supreme Court allowed the petition and appointed Justice Mohit S. Shah, former Chief Justice of the Bombay High Court, as the sole arbitrator to adjudicate the disputes between the parties. The Court clarified that all rights and contentions of the parties are left open for adjudication by the learned arbitrator.
Parties and Legal Representation
The petitioner, Cox & Kings Ltd., was represented by Mr. Hiroo Advani, while Mr. Ritin Rai appeared on behalf of the respondents, SAP India Pvt. Ltd. and SAP SE GmbH (Germany). The intervenors, the UNCITRAL National Coordination Committee for India (UNCCI), were represented by Mr. George Pothan Poothicote and Ms. Manisha Singh.
