The Supreme Court of India, comprising a bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva, has held that a non-signatory shareholder who executes a separate Share Purchase Agreement to fulfill the broader objectives of a Memorandum of Settlement is a “veritable party” to the arbitration agreement contained in the settlement. The apex court set aside an order of the Delhi High Court that had excluded a consultant shareholder from ongoing arbitration proceedings, ruling that his obligations were composite and interwoven with the primary settlement agreement.
Background of the Case
Appellant No. 1, KKH Finvest Private Limited, sought to acquire Appellant No. 2, Sensorise Digital Services Private Limited, alongside its sister concern, Sensorise Smart Solutions Private Limited. To resolve pending disputes and execute the takeover, a Memorandum of Settlement (MoS) was executed on May 9, 2022, between KKH Finvest (as the buyer) and Sensorise Digital Services, its sister concern, and its ex-promoters, Rajeev Arora and Sharad Arora.
The MoS categorized sellers into schedules: Schedule 1 listed the ex-promoters; Schedule 1A listed Management Team (MT) members (Ajay Nandy, Abhishek Batra, Prasun Nigam, and Achin Jain); and Schedule 2 listed consultants/employee shareholders, including Respondent No. 1, Ashiesh Shukla, who held 1,480 shares (representing a 0.05% shareholding).
Under the terms of the MoS, KKH Finvest agreed to purchase the complete shareholding of the sellers for a total settlement amount of ₹8 crore to acquire 100% control of Sensorise Digital Services. Simultaneously, separate Share Purchase Agreements (SPAs) and share transfer forms were executed with individual shareholders, including Ashiesh Shukla, on May 9, 2022, for his 1,480 shares at a proportionate amount of ₹86,831.60. The MoS also contained an arbitration clause under Sub-clauses 78–80.
When disputes arose following the execution of the MoS, KKH Finvest issued an arbitration invocation notice to the ex-promoters. On an application under Section 11 of the Arbitration and Conciliation Act, 1996, the Delhi High Court appointed former Chief Justice of India, Justice T.S. Thakur (Retd.), as the sole arbitrator on April 12, 2023. However, when KKH Finvest included MT members and Ashiesh Shukla in its Statement of Claims, objections were raised under Section 16 of the 1996 Act. Consequently, KKH Finvest and Sensorise Digital Services filed a joint application (Arbitration Petition No. 38 of 2024) before the Delhi High Court seeking reference of disputes concerning the MT members and Ashiesh Shukla to the same arbitrator.
Delhi High Court Decision
By an order dated October 21, 2024, the Delhi High Court held that the MT members were veritable parties to the MoS arbitration clause because their SPAs contained mirror obligations integral to the composite transaction. However, the High Court declined to refer Ashiesh Shukla to arbitration, relying on Clause 16 of his SPA, which stated:
“The transfer/sale of such shares shall be conclusive, independent, mutually exclusive and in no way connected with any of the remaining clauses of the present SPA and the MoS dated 09.05.2022.”
The High Court reasoned that Clause 16 demonstrated Shukla’s intent not to be bound by the MoS, making arbitration against him legally unsustainable. KKH Finvest subsequently challenged this finding before the Supreme Court.
Supreme Court’s Analysis
Examining the record, the Supreme Court observed that the High Court had failed to notice a crucial fact: the SPAs executed by all four MT members contained clauses identical to Clause 16 of Shukla’s SPA (specifically Clause 24 in Prasun Nigam’s SPA, Clause 24 in Abhishek Batra’s SPA, Clause 28 in Ajay Nandy’s SPA, and Clause 23 in Achin Jain’s SPA).
The Court observed that Recitals F, G, and H of Shukla’s SPA explicitly acknowledged the underlying MoS and the ₹8 crore settlement amount. The bench noted:
“In the light of the above clauses, there can be no doubting the fact that Ashiesh Shukla committed himself to the sale of his shares and to be bound by the terms of the MoS dated 09.05.2022.”
Referring to the landmark decision in Cox and Kings Limited vs. SAP India Private Limited and another ((2024) 4 SCC 1), the Court reiterated that non-signatories may be bound as veritable parties based on their legal relationship with signatory parties and their direct involvement in the performance of the underlying contract. The bench emphasized that the factors laid down in Oil and Natural Gas Corporation Limited vs. Discovery Enterprises Private Limited and another ((2022) 8 SCC 42) must be applied holistically to evaluate the composite nature of transactions and commonality of subject matter.
The Court held that Shukla’s performance of his SPA obligations was fundamental to achieving the MoS objective of 100% share acquisition. Finding no distinction between Shukla and the MT members, the Court observed:
“In effect, there was no real point of distinction between Ashiesh Shukla when compared to Ajay Nandy, Abhishek Batra, Prasun Nigam and Achin Jain. The difference drawn by the learned Judge between these identically situated persons was not founded on fact and is entirely unsustainable in the light of the similar agreements executed by all of them.”
Supreme Court’s Decision
The Supreme Court allowed the appeal and set aside the Delhi High Court judgment dated October 21, 2024, to the extent it related to Ashiesh Shukla. Holding Shukla to be a veritable party to the MoS arbitration agreement, the Court referred his disputes with KKH Finvest and Sensorise Digital Services to former Chief Justice of India, Justice T.S. Thakur (Retd.), to be adjudicated alongside the ongoing arbitration proceedings.
Case Title: KKH Finvest Pvt. Ltd. and another v. Ashiesh Shukla and others
Case No.: Civil Appeal No. … of 2026 (@ Special Leave Petition (C) No. 4222 of 2025)
Bench: Justice Sanjay Kumar and Justice Sanjeev Sachdeva
Date: August 5, 2026
