Veritable Party Test and Non‑Signatory Assignees: Supreme Court Clarifies Section 11 Scrutiny in Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd.

Veritable Party Threshold and Anti‑Assignment Clauses: Supreme Court Limits Non‑Signatory Assignees from Invoking Arbitration Agreements under Section 11

1. Introduction

The Supreme Court’s decision in Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd., 2025 INSC 1401 (9 December 2025), is a significant addition to Indian arbitration jurisprudence. It clarifies the role of the Section 11 referral court when faced with:

  • a non‑signatory seeking to invoke an arbitration clause, and
  • a chain of contracts involving assignment of receivables but express contractual prohibition on assignment/sub‑letting without consent.

The judgment synthesises and applies the recent Constitution Bench and larger Bench line of authorities — including Cox & Kings, Interplay between Arbitration Agreements and Stamp Act, SBI General v. Krish Spinning, Ajay Madhusudan Patel, and ASF Buildtech — to a concrete factual scenario involving a public sector principal (HPCL), its main contractor (AGC Networks/Black Box Ltd.), and a sub‑vendor (BCL).

The core legal principle

A Section 11 court must prima facie examine both (i) the existence of an arbitration agreement between the parties before it and (ii) whether a non‑signatory claimant is a “veritable party” to that agreement. If even prima facie the non‑signatory is not a veritable party, the referral court must refuse to refer the matter to arbitration — competence‑competence does not oblige arbitral tribunals to decide disputes where no arbitration agreement exists at all between those parties.

2. Factual Background

2.1 The HPCL Tender and the Anti‑Assignment Framework

HPCL floated a tender for the design, supply, installation, integration, testing, commissioning and post‑commissioning warranty support services for a Tank Truck Locking System (TTLS).

Key contractual clauses from HPCL’s tender / General Terms and Conditions include:

  • Clause 3.17 – Prohibition on sub‑letting, sub‑contracting or assigning the work without HPCL’s prior written consent:

“Contractor shall not be entitled to sublet, subcontract or assign, the work under this Contract without the prior consent of the Owner obtained in writing.”

  • Clause 5.c.1 – Reinforces the prohibition:

“No part of the contract nor any share or interest thereof shall in any manner or degree be transferred, assigned or sublet, by the Contractor, directly or indirectly to any firm or corporation whatsoever without the prior consent in writing of the Owner.”

  • Clause 14 – Arbitration clause in HPCL’s contract with its contractor, with Mumbai seat and exclusive jurisdiction of Mumbai courts.

2.2 HPCL–AGC Contract and Performance Disputes

  • On 20.08.2013, HPCL issued the purchase order to AGC Networks Ltd. (later known as Black Box Ltd.).
  • AGC accepted on 21/22.08.2013.
  • Disputes later arose regarding non‑functioning of the Electro Magnetic Locking System (EMLS) at certain locations (Vashi and Manmad), leading to notices and a show cause notice to AGC in 2016–2017.

Importantly, all performance‑related communication by HPCL was with AGC, not BCL.

2.3 AGC–BCL Back‑to‑Back Contract

Separately, on 15.01.2014, AGC entered into a “back‑to‑back” agreement with BCL Secure Premises Pvt. Ltd. (“BCL”) under which:

  • BCL undertook to perform the entire TTLS solution for AGC on a back‑to‑back basis.
  • BCL was to receive approximately 96% of the consideration payable by HPCL under HPCL’s PO to AGC.
  • BCL agreed to indemnify AGC in case the pilot project was unsuccessful and HPCL cancelled the contract.
  • Clause 4.1 required BCL to appoint a Project Manager, but provided that:
    “the Project Manager … shall not make any such communication/co‑ordination with HPCL without obtaining the prior written approval from AGC.”
  • The AGC–BCL agreement had its own arbitration clause (Clause 11), with seat at New Delhi/Mumbai and English as the language of arbitration.

HPCL was not a party to this contract; indeed, the contractual architecture interposed AGC as a buffer between HPCL and BCL, and expressly discouraged direct dealings between HPCL and BCL.

2.4 Disputes Between AGC and BCL

BCL’s disputes were, for several years, directed against AGC, not HPCL:

  • 2018: BCL filed a civil suit in Delhi against AGC to restrain encashment of BCL’s bank guarantee (HPCL was not a party).
  • BCL initiated a Section 9 insolvency petition under the IBC against AGC, which was rejected in 2019.
  • BCL approached the MSME Facilitation Council, Haryana multiple times:
    • First claim (No. 1446/2020) – later withdrawn in view of a settlement with AGC (20.06.2020).
    • Civil suit against AGC was then withdrawn on 17.07.2020.
    • Second claim (No. 2411/2021) – rejected as not maintainable due to the 2020 settlement and BCL’s relinquishment of rights.
    • Third claim (2023) – similarly rejected as not maintainable.

2.5 Settlement‑cum‑Assignment Between AGC and BCL

On 31.10.2023, AGC (Black Box) and BCL executed a Settlement‑cum‑Assignment Agreement. Crucial elements:

  • All mutual claims between AGC and BCL were settled and relinquished.
  • It was recorded that BCL might wish to “proceed against HPCL” for recovery of purported dues under the HPCL purchase order.
  • Clause 2.2: AGC represented and warranted that any amount/receivables accruing to AGC from HPCL “as a result of litigation/proceedings initiated by BCL against HPCL” would be transferred/assigned in entirety to BCL.
  • AGC was not to be impleaded or prejudiced in any proceedings BCL might initiate against HPCL.

Again, HPCL was not a party to this settlement or assignment.

2.6 BCL’s Attempt to Invoke HPCL’s Arbitration Clause

Armed with this assignment of receivables, BCL issued a notice under Section 21 of the Arbitration and Conciliation Act, 1996 on 28.08.2024, invoking the arbitration clause in HPCL’s tender for Indian bidders (i.e., the HPCL–AGC arbitration clause), and:

  • asserted that by virtue of the 31.10.2023 assignment it had “entered into the position of AGC”,
  • claimed approximately ₹3,00,01,810 plus 18% interest from HPCL.

HPCL’s reply (26.09.2024) rejected this, contending:

  • there was no privity of contract with BCL;
  • BCL’s assignment agreement with AGC was invalid against HPCL, as HPCL’s prior written consent (required by Clauses 3.17 and 5.c.1) had never been obtained;
  • no purchase order had ever been issued to BCL; and
  • the claim was time‑barred.

BCL then filed a Section 11(4) petition before the Bombay High Court, seeking appointment of an arbitrator.

2.7 High Court’s Order Under Section 11

The Bombay High Court allowed the Section 11 application and appointed an arbitrator, reasoning broadly that:

  • there was an arbitration agreement in existence (HPCL–AGC);
  • whether BCL, as assignee of AGC’s receivables, could bind HPCL to that agreement was a matter for the arbitral tribunal under Section 16; and
  • the tribunal should decide the issue of arbitrability as a preliminary issue, in order to balance interests.

HPCL appealed to the Supreme Court.

3. Summary of the Supreme Court’s Judgment

The Supreme Court (K.V. Viswanathan J. authoring, with J.B. Pardiwala J. concurring) allowed HPCL’s appeal, set aside the High Court’s order, and dismissed the Section 11 application.

The Court held that:

  • There was no arbitration agreement between HPCL and BCL.
  • BCL had failed even prima facie to demonstrate that it was a “veritable party” to the HPCL–AGC arbitration agreement.
  • Mere assignment of receivables between AGC and BCL, without HPCL’s contractual consent and without any evidence of HPCL’s intent to be bound vis‑à‑vis BCL, cannot:
    • make BCL a party to the HPCL–AGC arbitration agreement; or
    • allow BCL to claim as a person “through or under” AGC for purposes of invoking the arbitration clause.
  • The Section 11 referral court is not a “monotonous automation”: it must scrutinise whether a non‑signatory is a veritable party and may refuse reference where no such prima facie nexus exists.
  • Given the absence of an arbitration agreement, it was unnecessary to rule upon HPCL’s limitation/time‑bar objection.

The Court left it open to BCL to pursue any other remedies available in law, but not via the HPCL–AGC arbitration clause.

4. Detailed Analysis

4.1 Core Legal Issues

The decision turns on three inter‑related issues:

  1. Section 11 Scrutiny and Non‑Signatories: What is the scope of the referral court’s power and duty when a non‑signatory assignee invokes an arbitration agreement?
  2. Veritable Party Doctrine: When can a non‑signatory be considered a “veritable party” to an arbitration agreement such that it can be bound by, or invoke, that agreement?
  3. Effect of Anti‑Assignment Clauses and Assignment of Receivables: Does an assignment of receivables, in the face of an express prohibition on assignment/sub‑letting without consent, carry with it the right to invoke the arbitration clause?

4.2 Precedents and Authorities Cited

4.2.1 COX AND KINGS LTD. v. SAP INDIA PVT. LTD. (2024) 4 SCC 1

The Court relies extensively on the Constitution Bench decision in Cox & Kings, which elaborated the group of companies doctrine and the broader question of when a non‑signatory can be bound by an arbitration agreement.

Key propositions drawn from Cox & Kings (paras 84, 101, 126, 169, 170.12, as quoted):

  • The decisive question is whether a non‑signatory consented to be bound by the arbitration agreement.
  • Courts and tribunals determine this by applying ordinary principles of contract and corporate law, examining:
    • contractual language and
    • the factual matrix: negotiation, performance, termination, conduct of the parties.
  • Non‑signatory participation can sometimes create an appearance that it is a “veritable party” — especially where:
    • it is actively involved in performance;
    • its conduct harmonises with signatories; and
    • the counterparty reasonably relies on this to treat it as a party to the contract and arbitration clause.
  • In the context of Section 8/11 proceedings:
    • The referral court must prima facie determine the existence of the arbitration agreement and whether the non‑signatory is a veritable party.
    • Due to the complexity of this enquiry, a deeper determination should be left to the arbitral tribunal under Section 16, consistent with competence‑competence.
  • However, mere commercial relationship between signatory and non‑signatory is not enough to infer a legal relationship for arbitration purposes (para 117).

The present judgment uses these principles to articulate the threshold role of the Section 11 court: it must examine whether the non‑signatory is, even prima facie, a veritable party. Absent such a showing, reference must be declined.

4.2.2 In Re: Interplay Between Arbitration Agreements under the A&C Act & the Stamp Act (2024) 6 SCC 1

The Court cites the Constitution Bench decision in Interplay for the meaning of “examination of the existence of an arbitration agreement” under Section 11(6A).

As per para 167 (quoted):

  • “Examination” means the referral court must “inspect or scrutinise” dealings between the parties for the existence of an arbitration agreement; it is not a laborious or contested enquiry.
  • By contrast, under Section 16 the tribunal “rules” on its jurisdiction, including on existence and validity, after admitting evidence.
  • Thus, the court’s role is limited, but it is nonetheless a real scrutiny, not a mechanical referral.

The present judgment applies this to confirm that Section 11 courts must do more than simply rubber‑stamp a request whenever an arbitration clause is pointed to in some upstream contract.

4.2.3 SBI General Insurance Co. Ltd. v. Krish Spinning (2024) 12 SCC 1

This decision, authored by Pardiwala J. (who is on the present Bench), is cited to underscore that:

  • Under Section 11(6A), the court’s scrutiny is confined to the existence of an arbitration agreement, assessed prima facie (paras 113–115).
  • The referral court’s prima facie view does not bind the arbitral tribunal or the court at the enforcement stage; it primarily serves to:
    • weed out non‑existent arbitration agreements, and
    • preserve the tribunal’s jurisdictional competence for fuller examination where appropriate.

The present Bench builds on this, clarifying that a non‑existent agreement vis‑à‑vis a particular party must be filtered out at the Section 11 stage itself.

4.2.4 AJAY MADHUSUDAN PATEL v. JYOTRINDRA S. PATEL (2025) 2 SCC 147

This decision (also with Pardiwala J. on the Bench) is relied on for the following proposition (para 81, quoted):

  • The mere fact that a non‑signatory did not sign the arbitration agreement is an indicator, but not conclusive, of its intention not to be bound.
  • Court/tribunal must examine:
    • mutual intent of the parties,
    • relationship between non‑signatory and signatory,
    • commonality of subject‑matter,
    • composite nature of transactions, and
    • performance of the contract.

In HPCL v. BCL, these factors are applied but are found to be absent: HPCL and BCL “operated on separate orbits”.

4.2.5 ASF Buildtech Pvt. Ltd. v. Shapoorji Pallonji & Co. Pvt. Ltd. (2025) 9 SCC 76

BCL relied on ASF Buildtech to argue that, in view of Cox & Kings, questions about non‑signatory status and veritable partyhood should be left to the tribunal.

The Supreme Court carefully reconciles ASF Buildtech with prior authorities, and rejects any reading that would reduce the Section 11 court to a mere conduit:

  • ASF Buildtech acknowledges that the referral court may have discretion to decide non‑signatory issues but suggests it should be cautious and generally prefer reference to the tribunal.
  • However, ASF Buildtech itself (quoting para 169 from Cox & Kings) recognises that the referral court must prima facie rule on existence of the arbitration agreement and whether the non‑signatory is a veritable party.

The present judgment draws a critical distinction:

  • Where the referral court finds prima facie that a non‑signatory may be a veritable party, the deeper issue is left to the tribunal.
  • But where the referral court finds that the non‑signatory is clearly not a veritable party even prima facie, it must refuse reference; otherwise the court would become a “monotonous automation” and allow “absolute strangers” to force arbitration (para 35).

Thus, ASF Buildtech is held to be consistent with the present approach; it does not compel referral in every case.

4.2.6 Cox & Kings Ltd. (2) v. SAP (India) Pvt. Ltd. (2025) 1 SCC 611

This later decision, discussed in ASF Buildtech and cited here, reiterates that once an arbitral tribunal is constituted, parties can raise jurisdictional objections under Section 16, including about impleadment of non‑signatories.

The present Bench, however, distinguishes the factual matrix in Cox & Kings (2). There, complex facts made it appropriate to leave the non‑signatory question to the tribunal. In contrast, the facts here are straightforward, and the Court finds no prima facie basis to treat BCL as a party to the HPCL–AGC agreement.

4.2.7 Khardah Company Ltd. v. Raymon & Co. (1963) 3 SCR 183

This seminal contract law case is cited to clarify the law on assignment of contracts:

“… obligations under a contract cannot be assigned except with the consent of the promisee … [whereas] rights under a contract are assignable unless the contract is personal in its nature or the rights are incapable of assignment either under the law or under an agreement between the parties.”

In HPCL v. BCL, this principle is applied in conjunction with:

  • the express anti‑assignment clauses (3.17, 5.c.1) in HPCL’s tender; and
  • the absence of any consent from HPCL to assignment or sub‑letting.

Even if AGC attempted to assign its receivables to BCL, that could not, in law, without HPCL’s consent, result in transfer of obligations or of HPCL’s relationship with AGC to BCL — let alone transfer the arbitration agreement itself.

4.2.8 Pravin Electricals Pvt. Ltd. v. Galaxy Infra & Engineering Pvt. Ltd. (2021) 5 SCC 671

BCL relied on this case to argue that existence of an arbitration agreement is a prima facie matter and doubts should be resolved in favour of arbitration.

The Supreme Court finds this inapposite: Pravin Electricals involved a direct dispute between an employer and a tendering party as to whether any agreement existed between them. Here, HPCL’s contract is clearly with AGC; BCL is an external third party seeking to intrude into that relationship.

4.3 The Court’s Legal Reasoning

4.3.1 Threshold: Existence of Arbitration Agreement and Veritable Party Test

The Court re‑affirms that, post Section 11(6A), the referral court’s enquiry is confined to:

  1. Does an arbitration agreement exist under Section 7, between the particular parties before it?
  2. If a non‑signatory is involved, is there a prima facie basis to treat it as a veritable party to that agreement?

“Veritable” is explicitly defined (para 26) using the Illustrated Oxford Dictionary as meaning “real; rightly so called; truly, genuinely”. Thus, being a veritable party is substantive and factual, not merely formal or label‑based.

The Court emphasises that Section 11 does not preclude this scrutiny. On the contrary, the concept of “examination” (from Interplay and Krish Spinning) requires the court to “inspect and scrutinise” the dealings between the parties.

4.3.2 Application to Facts: No Veritable Party Nexus Between HPCL and BCL

On the factual record, the Court finds:

  • HPCL never dealt with BCL as a contracting party:
    • No HPCL purchase order was ever issued to BCL.
    • There is no material showing HPCL was even aware, during contract formation or execution, that BCL was the sub‑vendor or that HPCL intended to deal with BCL as a principal.
  • The AGC–BCL contract:
    • Was entirely inter se between AGC and BCL; HPCL was not a party.
    • Contained an express restriction (Clause 4.1) forbidding BCL’s Project Manager from directly communicating with HPCL without AGC’s prior written approval.
    • Had its own separate arbitration clause (Clause 11).
  • The 31.10.2023 Settlement‑cum‑Assignment:
    • Is also strictly between AGC and BCL; HPCL is not a party.
    • Merely provides that any receivables due from HPCL to AGC, if realised through litigation initiated by BCL, would be transferred to BCL.

Crucially, this does not create an arbitration agreement between HPCL and BCL, nor does it show any intention of HPCL to treat BCL as a contracting party. The Court states (para 31):

“This does not mean that there is an arbitration agreement existing between HPCL and BCL or that BCL was a veritable party to the agreement between HPCL and AGC.”

The Court therefore concludes that HPCL and BCL have been “operating on separate orbits” (para 32), with no evidence — even prima facie — of an intention to create a legal relationship for arbitration purposes.

4.3.3 Effect of Anti‑Assignment Clauses

HPCL’s tender conditions (Clauses 3.17 and 5.c.1) expressly prohibited sub‑letting, sub‑contracting, or assignment of the contract (or any share or interest therein) without HPCL’s prior written consent.

The Court notes (paras 20, 38–40) that:

  • BCL has not produced any proof of HPCL’s prior written consent to any assignment or sub‑letting.
  • In light of Khardah Co. v. Raymon, the combination of:
    • the general rule that obligations cannot be assigned without consent, and
    • an express contractual prohibition on assignment,
    means that:
    • the assignment agreement between AGC and BCL (31.10.2023) cannot bind HPCL, and
    • cannot transfer AGC’s contractual and arbitral position against HPCL to BCL.

Thus, even apart from veritable party analysis, the attempted “assignment” of the HPCL–AGC contract and its arbitration clause fails at law vis‑à‑vis HPCL.

4.3.4 “Claiming Through or Under” and Assignment of Receivables

BCL argued that, as an assignee of AGC’s receivables against HPCL, it was a person “claiming through or under” AGC and could therefore invoke the HPCL–AGC arbitration clause.

The Court rejects this, relying again on Cox & Kings (para 140, quoted) which holds that:

  • Typical scenarios of “claiming through or under” include assignment, subrogation, and novation.
  • The person claiming “through or under” asserts a derivative right — it does not have an independent right to stand as a party to the arbitration agreement.
  • Mere legal or commercial connection is not sufficient for a non‑signatory to claim through or under a signatory party.

In HPCL v. BCL, the Court holds (para 37–38):

  • BCL’s assignment is purely inter se with AGC.
  • There is no evidence, even prima facie, that HPCL:
    • consented to any assignment;
    • intended to recognise BCL as a contracting counterparty; or
    • intended to extend the arbitration agreement to BCL.
  • Consequently, BCL cannot be said to be “claiming through or under” AGC in a way that entitles it to directly invoke the HPCL–AGC arbitration clause against HPCL.

In simple terms: an assignment of receivables is not, without more, an assignment of the arbitration agreement, especially when the main contract forbids assignment without consent.

4.3.5 Competence‑Competence and the Limits of the “Hands‑Off” Approach

A major contribution of this judgment is to calibrate the “hands‑off” approach advocated in ASF Buildtech and Cox & Kings in favour of arbitral tribunals.

The Court makes two important clarifications:

  1. Referral court must not abdicate.
    The Section 11 court is not “a monotonous automation” (para 35). It must filter out cases where:
    • the arbitration agreement does not exist at all between the parties before it; or
    • a non‑signatory’s alleged link is so tenuous that there is no prima facie basis to treat it as a veritable party.
  2. Tribunal’s competence operates only where there is a prima facie agreement.
    Where the court finds prima facie existence of an arbitration agreement vis‑à‑vis a non‑signatory, issues of true party status, consent, and mandate can be left to the tribunal. But where there is no prima facie arbitration agreement between the specific parties, there is nothing to refer, and competence‑competence does not arise.

This carefully preserves the tribunal’s jurisdiction while also protecting parties from being dragged into an arbitration process by “absolute strangers” to the contract.

4.3.6 No Need to Decide Limitation

HPCL also argued that BCL’s claim was ex facie time‑barred. The Court notes this objection but declines to consider it, because:

  • the more fundamental threshold issue — the non‑existence of any arbitration agreement between HPCL and BCL — is dispositive; and
  • without an arbitration agreement, questions of limitation for arbitration do not arise.

4.4 Impact and Implications

4.4.1 For Contractors, Sub‑Contractors and MSMEs

  • Sub‑vendors cannot bypass their immediate contractor:
    • Even where a sub‑vendor performs the bulk of the work and is entitled to major receivables, it cannot, without a direct contractual nexus and arbitration agreement, directly sue or arbitrate against the principal employer.
    • BCL’s position — that it did 96% of the work and was effectively the “real” project party — was insufficient without HPCL’s consent and intent.
  • MSMEs must structure their contracts carefully:
    • Where an MSME vendor deals with a large integrator who is the main contractor with a PSU or large principal, the MSME must ensure that:
      • it has robust direct arbitration rights against its immediate counterparty; and/or
      • if direct claims against the principal are desired, there is an express tripartite arrangement or direct collateral contract/arbitration clause involving the principal.

4.4.2 For Assignments, Receivables Financing and Project Structures

  • Assignments of receivables do not automatically transfer arbitration clauses, particularly where:
    • the underlying contract prohibits assignment without consent; or
    • the debtor (here, HPCL) has not consented to the assignment.
  • Parties structuring receivables financing, escrow arrangements, or “back‑to‑back” contracts must be explicit if:
    • the debtor is expected to recognise the assignee as a contracting party, or
    • the arbitration clause is to be extended to the assignee.

4.4.3 For Drafting Anti‑Assignment and Sub‑Contracting Clauses

The decision powerfully reinforces the efficacy of anti‑assignment and anti‑sub‑letting clauses:

  • Public sector entities and large corporates can rely on such clauses to ensure they do not face direct claims from undisclosed or unauthorised sub‑contractors.
  • Contract drafters should:
    • expressly prohibit assignment of both the contract and the arbitration agreement (or any “rights and obligations thereunder”) without prior written consent; and
    • couple this with clear dispute resolution provisions covering authorised assignees or third‑party beneficiaries, if desired.

4.4.4 For Section 11 Jurisprudence and the “Hands‑Off” Approach

This judgment is a crucial counterweight ensuring that the pro‑arbitration “hands‑off” approach in Section 11 does not degenerate into judicial abdication.

In practical terms, Section 11 courts should:

  • Ask two questions in every non‑signatory case:
    1. Is there an arbitration agreement between someone and someone else?
    2. Is there any prima facie basis to say that the particular non‑signatory before the court is a veritable party to that agreement?
  • If the answer to (2) is “no” — as in HPCL v. BCL — the application should be dismissed.
  • If the answer is “yes, arguably” (complex group structures, heavy involvement in negotiation and performance, etc.), the matter should be left to the tribunal to decide finally under Section 16.

5. Simplification of Complex Concepts

5.1 Privity of Contract

Privity means that only parties to a contract:

  • can enforce it, and
  • are bound by its obligations (including the arbitration clause).

HPCL was in privity with AGC, and AGC was in privity with BCL. But HPCL and BCL had no direct contract. Absent any consensual expansion of this privity (e.g., a tripartite agreement), BCL could not directly enforce HPCL’s arbitration clause.

5.2 Non‑Signatory and “Veritable Party”

A non‑signatory is an entity that has not signed the contract or arbitration agreement but is nevertheless alleged to be bound by it.

A “veritable party” is a non‑signatory which, because of its:

  • deep involvement in negotiating or performing the contract,
  • representations, or
  • relationship with group entities,

is, in substance, treated by the other side as if it were a real contracting party.

In such cases, courts may pierce the formal non‑signatory status and bind it to the arbitration clause. But HPCL v. BCL holds that:

  • there must be at least a prima facie factual basis for such treatment; and
  • mere sub‑contracting or internal arrangements between the main contractor and a vendor is insufficient.

5.3 Group of Companies Doctrine

The group of companies doctrine allows, in exceptional cases, a company within a corporate group (which did not sign the contract) to be bound by or invoke an arbitration agreement signed by another group company, if:

  • the conduct of the group as a whole suggested a common intention that all would be bound; and
  • the non‑signatory group company played a material role in the transaction.

While the doctrine is mentioned (through Cox & Kings), it is not directly applied here because:

  • HPCL, AGC, and BCL are not part of a corporate “group” in the doctrinal sense; and
  • there is no evidence of a conscious intention across entities to bind BCL under the HPCL–AGC arbitration clause.

5.4 “Claiming Through or Under”

This phrase appears in several provisions of the A&C Act (e.g., Sections 8, 35) and allows certain successors or transferees (e.g., assignees, subrogees) to enforce or be bound by arbitration agreements.

However, as clarified in Cox & Kings and applied here:

  • the person must have a derivative legal right from the signatory; and
  • mere commercial proximity or sub‑contracting does not suffice;
  • the underlying contract must permit such assignment or succession, or the promisee (here HPCL) must have consented.

5.5 Assignment vs Novation vs Subrogation vs Receivables Assignment

  • Assignment: Transfer of rights under a contract (e.g., receivables). Obligations usually cannot be assigned without consent of the other contracting party.
  • Novation: Substitution of one contract or party for another, with consent of all concerned — effectively creating a new contract.
  • Subrogation: A third party (e.g., insurer) steps into the shoes of a creditor after paying its debt, enforcing the creditor’s rights against the debtor.
  • Assignment of Receivables: Transfer of only the right to receive payment; it does not usually transfer the entire contract or the arbitration agreement unless expressly provided and permitted by the contract and law.

In HPCL v. BCL, the 31.10.2023 agreement is an assignment of receivables between AGC and BCL. Without HPCL’s consent, and in the face of a prohibition on assignment, this assignment cannot make BCL a party to the HPCL–AGC arbitration agreement.

5.6 Section 11 vs Section 16 and Competence‑Competence

  • Section 11: Court appoints an arbitrator after “examining the existence of an arbitration agreement” (prima facie scrutiny).
  • Section 16: Arbitral tribunal may rule on its own jurisdiction, including existence and validity of the arbitration agreement, through a more detailed process (admission of evidence, etc.).
  • Competence‑competence: Principle that tribunals are competent to decide their own jurisdiction.

The present judgment clarifies that competence‑competence operates only where the court finds some prima facie arbitration agreement between the parties. Where none is found — as between HPCL and BCL — there is nothing to refer, and the tribunal’s jurisdiction cannot be invoked.

5.7 Anti‑Assignment Clauses

Anti‑assignment clauses (such as Clauses 3.17 and 5.c.1 in HPCL’s tender) are contractual mechanisms by which:

  • a party (here HPCL) reserves control over who it contracts with; and
  • prevents the other party from transferring rights or obligations to third parties without consent.

In effect, they ensure that the principal cannot be forced into dealings (including arbitration) with an unknown or unapproved party, reinforcing contractual certainty and risk allocation.

6. Critical Evaluation

The judgment is doctrinally coherent and doctrinally conservative. Several points merit comment:

6.1 Strengths

  • Doctrinal clarity: The Court carefully aligns the decision with Cox & Kings, Interplay, Krish Spinning, Ajay Madhusudan, and ASF Buildtech, clarifying that:
    • Section 11 courts must conduct a prima facie veritable party analysis; and
    • only when there is a plausible nexus should they defer to the tribunal.
  • Protection against abuse: By warning against becoming a “monotonous automation” and entertaining applications by “absolute strangers”, the Court protects parties from being dragged into arbitration without consent.
  • Respect for contract structure: It affirms that parties are free to structure their relationships — including strict anti‑assignment clauses — and that courts will respect those boundaries.

6.2 Potential Concerns or Open Questions

  • Risk of over‑zealous screening: Some might argue that lower courts, emboldened by this decision, could over‑scrutinise non‑signatory claims at the Section 11 stage, thereby eroding the pro‑arbitration presumption of reference where in doubt.
  • Fine line between “no prima facie case” and “complex case”: The threshold between:
    • a case where there is “no prima facie arbitration agreement”; and
    • a case where there is a complex but arguable nexus best left to the tribunal,
    remains fact‑sensitive and may lead to inconsistent applications unless lower courts adhere closely to the factors listed in Cox & Kings and Ajay Madhusudan.
  • Implications for MSME sub‑vendors: In practice, sub‑contractors who perform most of the work and bear most of the risk may feel exposed if they cannot access arbitration against the principal, especially where the main contractor is insolvent or uncooperative. The judgment implicitly encourages such parties to insist on:
    • direct collateral warranties or letters of comfort from the principal; or
    • express tripartite arbitration agreements.

7. Conclusion

Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd. is an important clarification of Indian arbitration law on three axes:

  1. Non‑Signatory Participation: The Court confirms that a non‑signatory must demonstrate at least a prima facie status as a “veritable party” to invoke or be bound by an arbitration agreement. Sub‑contracting arrangements and inter se assignments, without more, are insufficient.
  2. Section 11 Filtering Function: Referral courts must actively examine the existence of an arbitration agreement between the specific parties before them, including in non‑signatory scenarios, and may refuse reference where there is no prima facie nexus — competence‑competence does not require the tribunal to decide jurisdiction where there is no contract at all between the parties.
  3. Contractual Autonomy and Anti‑Assignment Clauses: Express prohibitions on assignment, sub‑letting or transfer without consent are effective and will be enforced. An assignment of receivables, particularly in the face of such a prohibition, does not automatically transfer the arbitration clause or transform the assignee into a party to the contract.

For future cases, this judgment will serve as a guidepost for:

  • Section 11 courts in deciding when to filter and when to refer non‑signatory disputes;
  • commercial parties structuring multi‑tiered project and sub‑contracting arrangements; and
  • litigants contemplating arbitration as assignees or sub‑vendors in the presence of anti‑assignment clauses.

In sum, the Supreme Court preserves the arbitral tribunal’s competence, but insists that arbitration remains a creature of consent, not an instrument by which strangers to a contract can compel parties to adjudicate disputes they never agreed to arbitrate.

Case Details

Year: 2025
Court: Supreme Court Of India

Judge(s)

HON'BLE MR. JUSTICE J.B. PARDIWALA HON'BLE MR. JUSTICE K.V. VISWANATHAN

Advocates

SANJAY KAPUR

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