Supreme Court Clarifies Arbitration Autonomy & Confidentiality: Non-Signatories Have No Right of Audience After Section 11 Appointment

1. Introduction

In Kamal Gupta v. M/s L.R. Builders Pvt. Ltd. (2025 INSC 975), the Supreme Court of India confronted two pivotal questions in the law of arbitration:

Whether a non-signatory to an arbitration agreement can be permitted to remain present (physically or through counsel) during arbitral proceedings?
Whether a court, having already appointed an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“the Act”), can issue further directions in the disposed matter?

The dispute arose out of an intra-family business settlement. An oral family settlement between Pawan Gupta (“PG”) and Kamal Gupta (“KG”) was subsequently recorded in a Memorandum of Understanding/Family Settlement Deed (“MoU/FSD”) dated 09-07-2019. Rahul Gupta (“RG”), KG’s son, did not sign the MoU/FSD. When disputes surfaced, PG invoked arbitration; RG sought to intervene both at the Section 11 stage and later after an arbitrator had been appointed. The Delhi High Court’s Single Judge allowed RG, a non-signatory, to merely watch the arbitral proceedings and issued further directions despite the Section 11 petition having been disposed of. PG and KG challenged those directions before the Supreme Court.

2. Summary of the Judgment

The Court (per Atul S. Chandurkar, J.) allowed the appeals.
Answer to Question (a): Negative. A non-signatory/non-party has no legal right to be present in arbitral proceedings between signatories; permitting such presence contravenes Section 42A (confidentiality) and the basic structure of party autonomy under the Act.
Answer to Question (b): Negative. Once an arbitrator is appointed under Section 11(6), the court becomes functus officio; it cannot reopen or entertain further interlocutory applications in that matter, except in situations expressly provided in Part I of the Act.
The Single Judge’s orders dated 07-08-2024 and 12-11-2024 were set aside in toto, including the directions that recognised RG’s “23 % share”, excluded certain properties from arbitration, and allowed him to attend the hearings.
Costs of ₹3,00,000 were imposed on the respondents for abuse of process.

3. Detailed Analysis

3.1 Precedents Cited

Nimet Resources Inc. v. Essar Steels Ltd. (2009) 17 SCC 313 – Emphasised that only parties to the arbitration agreement (or those claiming under them) are bound by the award.
In Re: Interplay between Arbitration Agreements… (2023 INSC 1066) – A Constitution Bench decision reaffirming minimal judicial intervention (Section 5) and describing the Act as a “self-contained code”.
Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. (2022) 1 SCC 75 – Stressed the restrictive non-obstante clause in Section 5 and the legislative intent to curb unnecessary court interference.
Other supportive references: Secur Industries Ltd. v. Godrej & Boyce, PASL Wind Solutions v. GE Power, Kandla Export Corp. v. OCI Corp.

The Court used these cases to show a strong continuum of jurisprudence: arbitration is party-driven; only statutory windows allow courts to step in.

3.2 Legal Reasoning

Statutory Textualism
• Section 2(h) defines “party” narrowly.
• Section 35 restricts the binding force of an award to parties and those claiming under them.
• Section 42A imposes strict confidentiality obligations.
• Section 5 limits judicial intervention; courts can intervene only where Part I of the Act so permits.
• The Act has no provision allowing “observers” or “spectators” in arbitration.
Functus Officio Principle
Once the appointment of the arbitrator was made on 22-03-2024, the Section 11 court was divested of further jurisdiction. Entertaining IA 37567/2024 months later was ultra vires. The Court relied on the Constitution Bench’s articulation that the Act is self-contained; any power not expressly specified is excluded.
Confidentiality & Party Autonomy
Allowing a stranger to attend violates Section 42A’s confidentiality mandate and erodes the private character of arbitration. The judge underscored that confidentiality is not a mere procedural nicety but a substantive statutory right.
Alternative Remedies for Non-Signatories
The Court clarified that if the award is sought to be enforced against a non-signatory, that person can resist at the enforcement stage under Section 36 or in execution under the CPC, obviating any need for an “observer” role at the merits stage.
Improper Use of Section 151 CPC
The respondents argued inherent powers of court under Section 151 CPC justified intervention. The Supreme Court rejected this, holding that Section 151 cannot override an express statutory scheme that is exhaustive.

3.3 Impact of the Judgment

Confidentiality Strengthened – Arbitrations in India now have Supreme Court backing for a stricter confidentiality regime; non-parties cannot demand presence or plead “transparency”.
Reduced Judicial Footprint – Section 11 courts are conclusively functus officio after appointment, discouraging “post-appointment” miscellaneous applications.
Clarity on Non-Signatory Rights – The decision separates two doctrines often confused: (a) group-of-companies and (b) observer/intervenor status. While non-signatories can, in limited circumstances, be bound to arbitrate (per Chloro Controls), mere curiosity or indirect interest does not confer an automatic right of participation.
Litigation Strategy – Lawyers must either join the correct parties at the Section 11 stage using established doctrines (assignment, implied consent, group-company), or await enforcement; they cannot obtain back-door access later.
Administrative Guidance – Arbitral tribunals can now rely on this precedent to deny similar “spectator” requests, preserving efficiency.

4. Complex Concepts Simplified

Arbitration Agreement: A written contract where parties agree to submit disputes to arbitration rather than court.
Section 11(6): Provision empowering a High Court or the Supreme Court to appoint an arbitrator when parties fail to do so.
Functus Officio: Latin for “having performed the office”. Once a court has decided a matter, it lacks authority to revisit it except under special statutory provisions.
Section 35 Binding Effect: The arbitral award is final and binds only the parties to the arbitration agreement and persons claiming through or under them.
Section 42A Confidentiality: Mandates that arbitrators, arbitral institutions and parties keep all arbitration information confidential, save where disclosure is necessary for enforcement or by law.
Section 151 CPC: Inherent powers of a civil court to ensure justice; cannot be used to contravene explicit statutory provisions.

5. Conclusion

The Supreme Court’s ruling in Kamal Gupta serves as a robust reaffirmation of two cornerstones of Indian arbitration law: (i) party autonomy/confidentiality, and (ii) minimal judicial intervention. It definitively bars non-signatories from intruding into private arbitration hearings merely on the basis of interest or apprehension, and it declares that courts cannot extend their supervisory hand after appointing an arbitrator under Section 11. The judgment strengthens India’s pro-arbitration credentials, delivers clarity to practitioners, and provides arbitrators with authoritative backing to maintain a closed, efficient, and confidential procedure.