Summary and Analysis of Kamal Gupta & Anr vs M/S L.R. Builders Pvt Ltd & Anr

1. Heading of the Judgment

Kamal Gupta & Anr. vs M/S L.R. Builders Pvt. Ltd. & Anr. (2025 INSC 975)
(Civil Appeal Nos. ______ of 2025)

Citation: Kamal Gupta & Anr. vs M/S L.R. Builders Pvt. Ltd. & Anr., 2025 INSC 975 (Supreme Court of India).

2. Relevant Laws and Sections

The judgment interprets the following provisions of the Arbitration and Conciliation Act, 1996:

• Section 2(h): Defines "party" as a signatory to the arbitration agreement.

• Section 5: Restricts judicial intervention in arbitration proceedings.

• Section 11(6): Governs the appointment of arbitrators by courts.

• Section 17: Grants arbitrators power to issue interim measures.

• Section 35: States that an arbitral award binds only parties to the arbitration and persons claiming under them.

• Section 42A: Mandates confidentiality of arbitral proceedings.

• Section 36: Enforcement of arbitral awards.

3. Basic Judgment Details

• Parties:
  Appellants: Kamal Gupta (KG) and Pawan Gupta (PG) (signatories to the arbitration agreement).
  Respondents: M/S L.R. Builders Pvt. Ltd. & Anr.
  Intervenors: Rahul Gupta (RG) and non-signatory companies (sons/affiliates of KG).

• Dispute Origin: An oral family settlement (later reduced to a MoU/FSD dated 09.07.2019) between KG and PG. RG was not a signatory to this agreement.

• Core Issue: Whether non-signatories (RG and his companies) could participate in arbitration proceedings and whether courts could issue ancillary directions after appointing an arbitrator.

• Outcome: The Supreme Court set aside the High Court's order permitting RG’s presence in arbitration.

4. Explanation of the Judgment

Background Facts

• KG and PG entered into a family settlement (MoU/FSD) in 2019 for asset division. RG (KG’s son) was not a signatory.

• Disputes arose, leading PG to file:
  A petition under Section 11(6) for arbitrator appointment.
  An application under Section 9 for interim protection of properties.

• RG applied to intervene in both proceedings, arguing the MoU affected his interests. The High Court rejected his intervention (order dated 22.03.2024), stating:
  The arbitrator would only resolve disputes between signatories (KG and PG).
  An arbitral award would not bind non-signatories like RG.

• After the arbitrator’s appointment, RG filed fresh applications (I.A. Nos. 37567/2024 and 39500/2024) seeking:
  Permission to attend arbitration hearings.
  Recall of the appointment order.

• The High Court permitted RG’s presence in arbitration (orders dated 07.08.2024 and 12.11.2024). KG and PG appealed to the Supreme Court.

Supreme Court’s Analysis

(I) Non-Signatories Cannot Participate in Arbitration (First Question)

• Legal Basis:
  Section 35 limits an arbitral award’s binding effect to parties to the agreement and their successors.
  Section 2(h) defines "party" strictly as a signatory to the arbitration agreement.

• Court’s Reasoning:
  RG, as a non-signatory, was a "stranger" to the arbitration. Permitting his presence would:
  Violate confidentiality under Section 42A.
  Undermine the autonomy of arbitration.
  Non-signatories have no legal right to attend proceedings. Their remedy lies in challenging award enforcement under Section 36.

• Conclusion: The High Court’s direction allowing RG’s presence was "without jurisdiction" and "unknown to law".

(II) Courts Cannot Issue Directions Post-Appointment of Arbitrator (Second Question)

• Legal Basis:
  Section 5 prohibits judicial intervention except where explicitly permitted by the Act.
  Section 11(6) proceedings end once an arbitrator is appointed; courts become functus officio (cease to have jurisdiction).

• Court’s Reasoning:
  After appointing the arbitrator on 22.03.2024, the High Court could not entertain fresh applications (e.g., RG’s plea for intervention).
  Using Section 151 of the CPC (inherent powers) to revive disposed proceedings was impermissible. The Arbitration Act is a self-contained code excluding general procedures.
  The High Court’s ancillary directions (e.g., recognizing RG’s 23% share in properties) amounted to reviewing/modifying its earlier order, which was illegal.

• Conclusion: Post-appointment interventions are "misconceived" and an "abuse of process".

Final Decision

• The Supreme Court allowed the appeals and set aside the High Court’s orders dated 07.08.2024 and 12.11.2024.

• RG and other non-signatories cannot participate in arbitration between KG and PG.

• The parties must resolve disputes as per the original order (22.03.2024).

• Costs of ₹3,00,000 imposed on respondents.

Key Legal Principles Established:

1. Arbitration is a private dispute resolution mechanism binding only signatories.

2. Courts lose jurisdiction after appointing an arbitrator under Section 11(6).

3. Non-signatories have no right to intervene in arbitration; their interests are protected via enforcement challenges.

4. Confidentiality under Section 42A is sacrosanct and bars third-party presence.