Reaffirming Arbitration Remedies Against Non-Signatories: A Commentary on Pawan Gupta & Anr. v. Miton Credentia Trusteeship Services Ltd. & Ors.

1. Introduction

The recent decision in Pawan Gupta & Anr. v. Miton Credentia Trusteeship Services Ltd. & Ors. (Delhi High Court, 27 December 2024) addresses critical questions regarding the interplay between ongoing arbitration proceedings and parallel civil litigation. The plaintiffs, Pawan Gupta and Renu Gupta, filed a commercial suit seeking declaratory reliefs and injunction, mostly pertaining to their alleged rights under a family settlement and the contention that a debenture trust deed created by certain corporate entities encumbered property that the plaintiffs believed was theirs by virtue of that settlement.

Against this factual background, the Court was asked to decide whether an ad interim injunction could be granted to protect the disputed property. The pivotal issues included: (1) whether the suit was maintainable in light of ongoing arbitration proceedings; (2) whether the plaintiffs had alternate remedies in the arbitral forum, even though one of the defendants (the debenture trustee) was not a direct party to the arbitration agreement; and (3) whether urgency existed to bypass the usual requirement of pre-institution mediation under the Commercial Courts Act, 2015.

The suit’s dismissal (regarding ad interim relief) and the Court’s explicit reliance on Blue Coast Infrastructure Development P. Ltd v. Blue Coast Hotels Ltd. & Anr., AIR Online 2020 Del. 862, reinforce the principle that property disputes connected to an arbitration can be addressed under Section 9 of the Arbitration and Conciliation Act, 1996, even if some of the litigants are not signatories to the arbitration agreement.

2. Summary of the Judgment

The Court refused to grant an ad interim injunction to the plaintiffs, primarily on the grounds that:

A robust arbitration mechanism was already in place to resolve inter-family disputes and property rights under the family settlement.
The plaintiffs had alternative remedies, notably under Section 9 of the Arbitration and Conciliation Act, 1996, to seek interim protection, including in scenarios where certain parties (like the debenture trustees) were not signatories to the arbitration agreement.
The Court was not convinced of the urgency claimed in seeking exemption from pre-institution mediation under the Commercial Courts Act, 2015, as the alleged cause of action was not recent but dated back to 2022.
The threshold issues with respect to the suit’s maintainability—especially regarding the plaintiffs’ status as shareholders, the question of corporate mismanagement, and the existence of an already-appointed arbitrator—cautioned against judicial interference.

Consequently, the Court held that the plaintiffs’ remedy was more appropriately pursued in arbitration proceedings or by resorting to the provisions under the Companies Act, if they believed there was mismanagement by the corporate entities.

3. Analysis

3.1 Precedents Cited

A crucial citation in the Court’s reasoning was Blue Coast Infrastructure Development P. Ltd v. Blue Coast Hotels Ltd. & Anr., AIR Online 2020 Del. 862. In that case, the Delhi High Court clarified that under Section 9 of the Arbitration and Conciliation Act, 1996, a party to an arbitration agreement may still seek interim relief against a non-signatory if the subject matter of the dispute forms part of the overarching arbitration’s ambit. This precedent underscored that an arbitration tribunal’s authority to preserve the status quo does not necessarily end at the doorstep of parties who have signed the agreement, when the property or rights in question belong to or affect the signatories’ interests in the arbitration.

3.2 Legal Reasoning

The Court’s legal analysis proceeded along multiple axes:

Concurrent Arbitral Proceedings: The Court noted that disputes over the family settlement and associated properties had already been referred to a learned sole arbitrator. Orders had been issued by the arbitrator prohibiting dealings that would prejudicially affect the disputed properties.
Maintainability Concerns: Because the plaintiffs, as mere shareholders in some of the defendant companies, were essentially leveling allegations of corporate mismanagement and breach of fiduciary duty, the Companies Act, 2013 (specifically Sections 241-246) provided an alternate avenue before the National Company Law Tribunal (NCLT). Hence, the Court questioned whether the suit was the proper forum.
Availability of Section 9 Remedies: The Court highlighted that a petition under Section 9 of the Arbitration and Conciliation Act could be filed even against non-signatories if the property in question was the subject of the arbitration. This was a direct application of Blue Coast. Therefore, the plaintiffs’ claim that they needed to file a civil suit to bind non-signatory parties was undermined by existing legal precedent.
Commercial Courts Act Prerequisite: The plaintiffs had also filed an application to be exempted from mandatory pre-institution mediation. The Court noted that the alleged cause of action had existed for a considerable period, negating the argument of urgency to bypass this statutory step.

Consequently, the Court concluded that the suit was either premature or improperly structured outside the framework of the arbitral proceedings and the Companies Act.

3.3 Impact

This Judgment has significant implications for future commercial and shareholder disputes that intersect with arbitration proceedings. Three core impacts arise:

Expanded Comfort in Arbitration: Litigants can be reassured that interim relief under Section 9 may be sought even when certain property holders or claimants are non-signatories. This strengthens arbitration as an effective, self-contained mechanism for resolving complex family or shareholder disputes.
Clarified Forum Selection: The decision discourages seeking parallel civil litigation when arbitration or specialized tribunals (like the NCLT) already possess the jurisdiction to grant overlapping relief. Plaintiffs are encouraged to harmonize their strategies with those existing forums to avoid duplicative proceedings.
Heightened Responsibility in Disclosure: The Court’s emphasis on the non-disclosure by some defendants (regarding encumbrances) highlights the obligation of all parties to be transparent in concurrent proceedings. Concealment of crucial transactions may result in adverse orders later.

4. Complex Concepts Simplified

Section 9 of the Arbitration and Conciliation Act, 1996: This provision allows parties (or even non-parties, in certain limited circumstances) to seek interim relief from the Court to protect subject matter pending the outcome of arbitration proceedings.
Ad Interim Injunction: A temporary court order restraining a party from undertaking certain acts until the Court can fully hear the matter. In this Judgment, the plaintiffs sought such an injunction to preserve the disputed Karol Bagh property but were unsuccessful due to existing arbitration orders and lack of urgency.
Family Settlement: An arrangement to distribute assets among members of a family. Even if such settlements define parties’ benefits, disputes thereunder often include corporate vehicles and require specialized adjudication mechanisms, such as arbitration or the NCLT.
Pre-Institution Mediation (PIM) under the Commercial Courts Act, 2015: Before instituting a commercial suit, parties are generally required to attempt mediation unless there is a pressing urgency. The Court was not persuaded that any grave urgency existed in this case.

5. Conclusion

In Pawan Gupta & Anr. v. Miton Credentia Trusteeship Services Ltd. & Ors., the Delhi High Court underscored the primacy and breadth of arbitration proceedings in complex commercial and family settlement disputes. The Court signaled that plaintiffs, especially shareholders alleging mismanagement, must seek redress through either the arbitral process (with the option of Section 9 relief) or under the Companies Act, rather than instituting parallel civil suits. Crucially, the ruling confirms that non-signatory parties may still be subject to interim protective measures if the property they hold or encumber is central to the underlying arbitration dispute. This Judgment thus stands as a clear reaffirmation that arbitral tribunals—and the courts supporting them—are well-equipped to address all facets of disputed property and corporate control.