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Kamal Gupta v. M/S L.R. Builders Pvt. Ltd.

Civil Appeal · 2025 INSC 975Decided 13 Aug 2025
Civil Appeal Nos. arising out of SLP (C) Nos. 4775-4779 of 2025 (Diary No. 7529/2025)
Justice Pamidighantam Sri Narasimha · Justice Atul S. Chandurkar

Background

Members of the Gupta family entered an oral family settlement in 2015, later reduced to a Memorandum of Understanding/Family Settlement Deed (MoU/FSD) in 2019, which was not signed by Rahul Gupta (son of one of the settlors). When a dispute arose between the signatories, a sole arbitrator was appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996, and Rahul Gupta's plea to intervene was rejected at that stage. Months after the arbitrator's appointment, Rahul Gupta and other non-signatory companies filed fresh applications in the already-disposed proceedings asking to be present during the arbitration and to access its records; a High Court judge allowed this and also recognised a 23% share for Rahul Gupta in the family properties.

Decision Breakdown

The Supreme Court held that once a sole arbitrator is appointed under Section 11(6), the court becomes "functus officio" and has no further jurisdiction to entertain fresh applications in that disposed-of proceeding. Since an arbitral award binds only parties to the arbitration agreement (Section 35) and non-signatories are strangers to it, there was no legal basis to let a non-signatory remain present during the arbitration; doing so would also breach the confidentiality obligation under Section 42A. The Court therefore set aside the High Court's order permitting Rahul Gupta's presence and the accompanying directions, and allowed the appeals with costs of Rs. 3,00,000 payable to the Supreme Court Advocates-on-Record Association.

Lesson Learnt

A person who has not signed an arbitration agreement has no right to attend or observe the arbitration proceedings between the actual parties, and once a court has appointed an arbitrator under Section 11(6), it loses jurisdiction to pass further directions in that same case: any new dispute must go through a fresh, properly framed proceeding.

Official source (sci.gov.in)View Judgment (PDF)

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