INDIA Law and Practice Contributed by: Amit Mishra and Mitakshara Goyal, Svarniti Law Offices
Indian advocates, however, are expressly prohibited from funding litigation for their clients under the Bar Council of India’s Rules of Professional Conduct and Etiquette. While there is no statutory regime, some arbitral insti - tutions in India have begun to address third-party funding through their rules. For example, the MCIA Rules (3rd Edition, effective May 2025) require parties to disclose: • the existence of a funding agreement; • the identity of the funder; and • whether the funder has agreed to cover adverse costs. These disclosures must be made promptly, either with initial pleadings or within seven days of entering into a funding agreement, and parties must update the tribunal and other parties if there are changes. 13.4 Consolidation The ACA does not contain any explicit provisions regarding the consolidation of arbitral proceedings. Nevertheless, it is common practice in India for dis - putes arising under multiple contracts between the same parties to be heard together by a single arbitral tribunal, provided the parties agree. Depending on their preferences, the tribunal may issue a single con - solidated award or separate awards for each contract. The Supreme Court has endorsed this approach in P.R. Shah, Shares and Stock Brokers Pvt. Ltd. v B.H.H. Securities Pvt. Ltd. (2011), in which it held that a party’s claims against multiple parties under sepa - rate arbitration agreements can be consolidated and resolved in a single arbitration. The Court reasoned that refusing consolidation would result in unneces - sary multiplicity of proceedings, potential for conflict - ing decisions and overall injustice. Furthermore, in Chloro Controls India (P) Ltd. v Sev- ern Trent Water Purification Inc. , the Supreme Court recognised the principle of making a composite ref - erence to arbitration under Section 11 of the ACA. This is particularly relevant in situations involving a single economic transaction or a principal contract
with related ancillary contracts, or where the “group of companies” doctrine applies, allowing even non- signatories to be bound by the arbitration clause. The Court clarified that such a composite reference would lead to a single arbitral tribunal delivering a composite award, thereby streamlining the adjudication process Under Indian law, third parties who are not signatories to the arbitration agreement are generally not bound by either the arbitration agreement or the resulting award. This follows the doctrine of privity of contract, which holds that only parties to a contract are bound by its terms. and avoiding fragmented litigation. 13.5 Binding of Third Parties However, Indian courts have recognised exceptions, most notably through the group of companies doc - trine, according to which a non-signatory can be bound by an arbitration agreement if: • there is a close legal relationship between the sig - natory and the non-signatory (such as being part of the same corporate group); • the non-signatory has played a significant role in the negotiation, performance or termination of the contract; or • the intention to bind the non-signatory can be inferred from the circumstances, including the composite nature of the transaction and the con - duct of the parties. In Cox & Kings Ltd. v SAP India Pvt. Ltd. (2023), the Supreme Court affirmed that the group of companies doctrine is part of Indian arbitration law, allowing non- signatories to be compelled to arbitrate if the facts show they were intended to be bound by the agree - ment. The arbitral tribunal, rather than the court, is generally the proper forum to decide whether a non- signatory should be joined, based on the evidence
and the parties’ conduct. Assignment and Novation
A third party may also be bound if the arbitration agreement is expressly assigned to them along with the contract, provided there is clear consent to such assignment.
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