Dr D Y CHANDRACHUD, J
1 The appeals in the present case arise under Sec(cid:34)on 423 of the Companies Act, 2013 against a judgment and order of the Na(cid:34)onal Company
Law Appellate Tribunal1 dated 18 July 2017. The NCLAT has dismissed an appeal filed against an order dated 6 March 2017 of the Na(cid:34)onal
Company Law Tribunal2 at its Chennai Bench.
2 The second respondent is a company by the name of Spor(cid:34)ng Pas(cid:34)me India Limited3. It was incorporated on 2 May 1994, as a fully owned
subsidiary of the first respondent, Kasturi & Sons Limited4. On 19 July 2004 an agreement was entered into between KC Palanisamy5 (the third
respondent), KSL (the first respondent) and SPIL and a company by the name of Hindcorp Resorts Pvt. Ltd. (Hindcorp). Under the agreement
SPIL was to allot 240 lakh equity shares of Rs 10 each, fully paid up at par to KSL against the book debts due by SPIL to KSL. KSL offered to sell to
KCP or his nominees 243 lakh equity shares represen(cid:34)ng 90 per cent of the total paid up share capital for a lumpsum considera(cid:34)on of Rs
2,31,50,000. The inten(cid:34)on of the par(cid:34)es, as reflected in the agreement, was that KCP would take over the business, shares and liabili(cid:34)es of
SPIL and would discharge the liabili(cid:34)es set out in Schedules 2 and 3 of the agreement which were outstanding on the date of the agreement.
KCP agreed to discharge the Schedule 2 liabili(cid:34)es within 180 days from the date on which he took over management of SPIL. Clause 14 of the
agreement was to the following effect:
“KSL hereby recognise the right of KCP and/or his nominees to sell or transfer their holding in SPIL to any other person of their choice,
provided the proposed transferees accept the terms and condi(cid:34)ons men(cid:34)oned in this agreement for the management of SPIL and related
financial aspects covered by this agreement.â€
The agreement contained the following provision for resolution of disputes by arbitration:
“In the unlikely case of dispute arising out of this agreement rela(cid:34)ng to claims and counter claims, the par(cid:34)es hereto agree that the same
shall be referred to Arbitration under he Indian Arbitration Law. The arbitration shall be by three arbitrators.
KCP shall be en(cid:34)tled to appoint one arbitrator. KSL shall be en(cid:34)tled to appoint one arbitrator. The two arbitrators so appointed shall elect the
third arbitrator.†An amount of Rs 2.5 crores was paid by KCP as against a total considera(cid:34)on of Rs 30 crores. Ninety per cent of the shares
were transferred by KSL to KCP and to his nominees in the following manner:
• One share to KCP • Ninety five per cent shares to Cheran Proper(cid:34)es Limited, the appellant • One share each to Cheran Enterprises
Pvt.Ltd., KCP Associates Holdings P. Ltd., CG Holdings (P) Ltd. and Cheran Holdings P. Ltd. On 17 August 2004, a le(cid:75)er was addressed by KCP
ac(cid:34)ng as the authorized signatory of the appellant to KSL. The le(cid:75)er specifically contained a reference to the share purchase agreement dated
19 July 2004. The text of the letter is extracted below:
“Re: SHARE PURCHASE AGREEMENT DT.19.7.04
In pursuance of the above Agreement, you have agreed to sell and our Group Companies, by themselves and/or by their nominees have
agreed to purchase shares in Sporting Pastime India Limited of a face value of Rs. 2,430 lakhs, for a sum of Rs. 243.00 lakhs.
Accordingly we send herewith seven Share Transfer Deeds duly executed by us and we request you to execute the same and lodge them with
Sporting Pastime India Limited together with relevant Share Certificates for registering the transfers in the Following names :
1. C G Holdings (P) Ltd.
2. Cheran Holdings P Ltd.
3. KCP Associates Holdings P. Ltd
4. Mr K C Palanisomi
5. Cheraan Properties Limited
6. Cherraan Properties Limited 242,99.994
7. Cherraan Proper(cid:34)es Limited Total 243.00.000 We enclose a Demand Dra(cid:80) no. 788401 dt. 16.08.04, drawn on ABN AMRO Bank, for Rs.
2,43,00,000, (Rupees Two Crores lakhs only) towards Share Consideration as above. Kindly acknowledge receipt thereof.
We will now have to draw up a Supplementary Agreement to the above Share Purchase Agreement to reflect the altered considera(cid:34)on. We
will also have to sign all the Annexures to the Agreement.
There are certain outstanding guarantees issued by you, to the par(cid:34)es listed in Schedule 2 to the above Agreement. You are requested to keep
your guarantees in good standing in accordance with the terms of the Agreement. We shall relieve your guarantees in accordance with the
Agreementâ€.
3 Since the transac(cid:34)on was not completed by KCP, disputes arose between the par(cid:34)es resul(cid:34)ng in the commencement of arbitral proceedings.
On 16 December 2009 the arbitral tribunal made its award in the following terms:
“28.0 Award 28.01 In the result this Arbitral Tribunal passes the final Award in the arbitra(cid:34)on ma(cid:75)er between M/s Kasturi & Sons Limited
M/s Hindcorp Resorts Private Limited, the claimants and Mr K C Palaniswami and M/s Sporting Pastime India Limited, the respondents:-
(i) Direc(cid:34)ng the respondents to return to the claimants the documents of (cid:34)tle and share cer(cid:34)ficates rela(cid:34)ng to 2,43,00,000 shares of the
second respondent namely Spor(cid:34)ng Pas(cid:34)me India Limited, which were handed over earlier to the first respondent pursuant to the agreement
dated 19/07/2004 in the manner following :
(a) The documents of (cid:34)tle rela(cid:34)ng to the second claimant being part of the documents of (cid:34)tle referred to above to the second claimant,
forthwith.
(b) The documents of (cid:34)tle pertaining to the first claimant being part of the documents of (cid:34)tle referred to in (a) above and the share
cer(cid:34)ficates pertaining to 2,43,00,000 shares referred to above contemporaneously with the first claimant paying / tendering the sum of Rs.
3,58,11,000/- (Rs. Three crores fi(cid:80)y eight thousand eleven thousand only) to the first respondent as per para 27.01 with interest @ 12% p.a. on
Rs. 2,55,00,000/- from the date of award (cid:34)ll 17/01/2010 or earlier payment/tender and therea(cid:80)er @ 18% p.a. on Rs. 2,50,00,000/- (cid:34)ll date of
payment / tendering of the amount of Rs. 3,58,11,000/-
(ii) Dismissing the counter â€" claim of the respondents for Rs. 8,83,23,086/-
(iii) Direc(cid:34)ng the respondents to bear the costs of the proceedings in a sum of Rs. 60,15,000/- the claimants being en(cid:34)tled to the same in para
23.09 hereinabove and the same having been set-off in the manner stated in para 26.01 hereinabove.
(Iv) Direc(cid:34)ng the respondents to bear their own costs in both the claim and the counter-claim.†Under the terms of the award, a direc(cid:34)on was
issued under which KCP and SPIL were required to return documents of (cid:34)tle and share cer(cid:34)ficates rela(cid:34)ng to 2.43 crore shares
contemporaneously with KSL paying an amount of Rs 3,58,11,000 together with interest at 12% p.a. on a sum of Rs 2.55 crores.
 4  KCP challenged the award of the arbitral tribunal under Sec(cid:34)on 34 of the Arbitra(cid:34)on and Concilia(cid:34)on Act, 1996. The challenge was
repelled by a learned Single Judge of the Madras High Court by a judgment and order dated 30 April 2015. The appeal filed by KCP was
dismissed by the Division Bench of the High Court on 24 January 2017. This Court dismissed the Special Leave Pe(cid:34)(cid:34)on challenging the
judgment of the Division Bench on 10 February 2017. The award has attained finality.
5 KSL ini(cid:34)ated proceedings, inter alia, under Sec(cid:34)on 111 of the Companies Act, 1956 read with Sec(cid:34)ons 397, 398, 402 and 403, among other
things, for rec(cid:34)fica(cid:34)on of the register of SPIL. NCLT allowed the pe(cid:34)(cid:34)on by its order dated 6 March 2017. The decision of the NCLT was
affirmed by NCLAT on 3 May 2017.
6 NCLAT held that the appellant is a nominee of KCP and holds the shares in ques(cid:34)on on his behalf. Hence, NCLT was held to be jus(cid:34)fied in
entertaining the proceedings for rec(cid:34)fica(cid:34)on under Sec(cid:34)on 111. For coming to the conclusion that the appellant is a nominee of KCP and held
the shares on his behalf, reliance has been placed on a judgment dated 29 April 2011 of the Madras High Court inter partes in an applica(cid:34)on
under Section 9 of the Arbitration and Conciliation Act, 1996. The Madras High Court formulated the following questions for consideration:
“(1) Whether an order of interim injunc(cid:34)on can be passed against the respondents who are not party to the arbitra(cid:34)on agreement or
arbitration proceedings;
(2) Whether the respondents 3 to 6 can be said to be nominees of Sri K.C. Palanisamy so as to be bound by the Arbitra(cid:34)on Award, for passing
interim direc(cid:34)on against them.†The High Court came to the conclusion that clause 14 of the agreement dated 19 July 2004 recognise the right
of KCP to transfer his holding in SPIL to a person of his choice, provided that the proposed transferee accepts the terms and condi(cid:34)ons
men(cid:34)oned in the agreement for the management of SPIL together with related financial aspects covered by the agreement. The High Court
held that the shares had not been purchased by the appellant as a ma(cid:75)er of an independent right but as a nominee of KCP. The purchase of
the shares was in pursuance of the agreement dated 19 July 2004. Rec(cid:34)fica(cid:34)on of the register was held to have been ordered by the NCLT
correctly. The appeal was dismissed.
7 We have heard Mr Kapil Sibal and Dr Abhishek Manu Singhvi, learned senior counsel in support of the appeal and Mr Mukul Rohtagi and Mr
Arvind Datar, learned senior counsel on behalf of the respondents. 8 On behalf of the appellants it has been urged that:
Firstly, the appellant is not a party to the arbitration agreement contained in clause 21 of the agreement dated 19 July 2004.
This agreement was entered into between KCP, KSL, SPIL and Hindcorp. Even though the appellant purchased the shares of SPIL as a nominee
of KCP, the arbitral award which has been rendered in proceedings between the par(cid:34)es to the agreement dated 19 July 2004 does not bind the
appellant;
Secondly, the principle that an arbitra(cid:34)on agreement will, under Sec(cid:34)on 7, bind only par(cid:34)es and not a third party in the posi(cid:34)on of the
appellant, is se(cid:75)led by the decisions of this Court in Indowind Energy Limited v Wescare (India) Limited(2010) 5 SCC 306.and in S.N.Prasad,
Hitek Industries (Bihar) Limited v Monnet Finance Limited (2011) 1 SCC 320;
Thirdly, an arbitral award has to be enforced as a decree of a civil court in view of the provisions of Sec(cid:34)on 36. The arbitral award could not
have been enforced by pursuing proceedings before the NCLT;
Fourthly, though a review was sought before the NCLAT on the basis of the law laid down by this Court in Indowind (supra) it was summarily
dismissed on the ground that there was no error in the original judgment.
9 Mr Kapil Sibal, learned senior counsel, has basically urged three submissions in support.
Firstly the appellant ought to have been, but was not impleaded as a party to the arbitral proceedings (obviously because it was not a party to
the arbitra(cid:34)on agreement). The appellant has (2010) 5 SCC 306 (2011) 1 SCC 320 paid valuable considera(cid:34)on for the shares purchased by it. KSL
proceeded on a wrong legal basis in the first place and has compounded its legally untenable approach by selec(cid:34)ng a wrong remedy by moving
the NCLT;
Secondly, Chloro Controls India Private Limited v Severn Trent Water Purifica(cid:34)on Inc. (2013) 1 SCC 641 does not apply because it deals with an
interna(cid:34)onal arbitra(cid:34)on under Sec(cid:34)on 45 whereas this was a case of a domes(cid:34)c arbitra(cid:34)on. The provisions of Sec(cid:34)on 45 must be dis(cid:34)nguished
from unamended Sec(cid:34)on 8 of the Arbitra(cid:34)on and Concilia(cid:34)on Act 1996. The appellant is not a party to the arbitra(cid:34)on agreement and having
paid consideration for its purchase of shares, is not bound by the arbitral award;
Thirdly, the decision in Chloro Controls has been clarified by this Court in Duro Felguera, S.A. v Gangavaram Port Limited(2017) 9 SCC 729.
10 Dr Abhishek Manu Singhvi has in his submissions addressed the Court on the following propositions.
Firstly, the arbitral award dated 16 December 2009 cannot be executed against the appellant which is admi(cid:75)edly not a signatory to the
agreement dated 19 July 2004 which contains a provision for arbitration;
Secondly, the arbitral award cannot be executed by a Tribunal such as the NCLT/NCLAT in a “camouflaged pe(cid:34)(cid:34)on†(under Sec(cid:34)ons 111,
397, 398, 402 and 403 of the Companies Act 1956) which would be barred by Section 42 of the Arbitration and Conciliation Act, 1996;
Thirdly, the prayer seeking a rec(cid:34)fica(cid:34)on of the register of members fails to meet the strict requirements of Sec(cid:34)ons 111 and 111 A of the
erstwhile Companies Act 1956 and hence the direc(cid:34)on to rec(cid:34)fy the register of members is fallacious; Fourthly, NCLAT as well as NCLT have
failed to explain or distinguish the settled principle of law laid down in the judgment of this Court in Indowind;
Fi(cid:80)hly, reliance on the le(cid:75)er dated 17 August 2004 addressed on behalf of the appellant and on the order of the Madras High Court in the
petition under Section 9 is misconceived;
Sixthly, during the course of the proceedings under Sec(cid:34)on 9, counsel for the appellant had conceded that the expression ‘party’ means
a party to the arbitration agreement and which is actually before the arbitral tribunal;
Seventhly, for the Chloro Controls principle to be attracted, the following requirements are necessary:
(a) there has to be a joint venture agreement;
(b) there must be a mother agreement;
(c) the mother agreement must contain an arbitration agreement;
(d) agreements ancillary to the mother agreement need not contain an arbitration agreement; and
(e) there must be a finding that the ancillary agreements cannot be performed in the absence of the mother agreement. 11 On the other hand,
it has been urged on behalf of the respondents that:
Firstly, Clause 14 of the agreement dated 19 July 2004 specifically provides that the nominees of KCP would be bound by the agreement. The
recogni(cid:34)on of the right of KCP to sell or transfer his holdings in SPIL was expressly subject to the condi(cid:34)on that the proposed transferees
would accept the terms and condi(cid:34)ons of the agreement. Such an acceptance would necessarily include all its provisions including the
arbitration agreement contained in clause 21;
Secondly, the condi(cid:34)on for KCP’s nominees to obtain the shares of SPIL having been spelt out in clause 14, the appellant is merely a
nominee and is not entitled to raise the present dispute;
Thirdly, in the order of the High Court dated 29 April 2011 under Sec(cid:34)on 9 of the Arbitra(cid:34)on and Concilia(cid:34)on Act 1996, the appellant was held
specifically to be a nominee of KCP whose purchase of shares was referable to the agreement dated 19 July 2004. The appellant which is a
party to those proceedings has not challenged the finding;
Fourthly, the arbitral award has the status of a decree under Sec(cid:34)on 36 and can be enforced “as if†it is a decree of the court. Under the
Companies Act, no ma(cid:75)er rela(cid:34)ng to the transfer of shares can be decided except by the NCLT a(cid:80)er 2013. KSL requires physical custody of the
share cer(cid:34)ficates and rec(cid:34)fica(cid:34)on of the share register. Mere transfer of the physical custody of the share cer(cid:34)ficates wold not be sufficient,
since a rec(cid:34)fica(cid:34)on of the share register is required to perfect the (cid:34)tle of KSL. Consequently, it was necessary for KSL to move the NCLT for
rectification of the share register under Section 111; and
 Fi(cid:80)hly, the principle that an arbitral award may bind a group company, which is an affiliate of a signatory to the arbitra(cid:34)on agreement has
been se(cid:75)led in a judgment of a three judge bench of this Court in Chloro Controls. While there can be no dispute about the applicability of the
Indowind principle in the generality of cases, a(cid:75)ribu(cid:34)on of an arbitral award to a group company is governed by the decision in Chloro
Controls (supra).
12 Mr Mukul Rohtagi and Mr Arvind Datar have countered the submissions which were urged on behalf of the appellant. They have urged that:
Firstly, each of the submissions which are sought to be advanced before this Court in the present appeals were urged before the Madras High
Court in the proceedings under Sec(cid:34)on 9. The Madras High Court has categorically rejected those submissions and has held that the appellant,
at all material (cid:34)mes, acted as a nominee of KCP under the agreement dated 19 July 2004. The appellant’s le(cid:75)er of 17 August 2004
categorically contains a reference to the earlier agreement and establishes beyond doubt that the appellant assumed all the obliga(cid:34)ons under
the agreement, including the remedy of arbitration;
Secondly, Indowind is essen(cid:34)ally a case under Sec(cid:34)on 11 of the Arbitra(cid:34)on and Concilia(cid:34)on Act, 1996. In the present case the Court is dealing
with a post award enforcement;
Thirdly, Sec(cid:34)on 35 of the Arbitra(cid:34)on and Concilia(cid:34)on Act, 1996 indicates that an arbitral award binds par(cid:34)es to an arbitra(cid:34)on and persons
claiming under them. The appellant has, at all material (cid:34)mes, been aware of the fact that it was claiming under KCP in pursuance of the
original agreement dated 19 July 2004 and its letter dated 17 August 2004;
Fourthly, the judgment in Chloro Controls explains the concept of a person claiming under a party to an arbitra(cid:34)on agreement and is a(cid:75)racted
to the present case on all fours; and Fi(cid:80)hly, the consequence of the arbitral award is to envisage a transmission of the shares to KSL by
opera(cid:34)on of law. This being the posi(cid:34)on, the CLB could have directed a rec(cid:34)fica(cid:34)on of the register of the company. Upon the cons(cid:34)tu(cid:34)on of
the NCLT, exclusive jurisdic(cid:34)on to do so stands vested in it. The transmission of shares, as a consequence of law under the arbitral award, has
to be given effect to by a formal rec(cid:34)fica(cid:34)on of the register. To effectuate this, the only remedy which is available to KSL was to move the
NCLT for rectification.
13 The rival submissions will now be analysed.
14 Section 7 of the Arbitration and Conciliation Act, 1996 provides thus:
“7 Arbitra(cid:34)on agreement. â€" (1) In this Part, “arbitra(cid:34)on agreement†means an agreement by the par(cid:34)es to submit to arbitra(cid:34)on all or
certain disputes which have arisen or which may arise between them in respect of a defined legal rela(cid:34)onship, whether contractual or not. (2)
An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained inâ€
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the
other.
(5) The reference in a contract to a document containing an arbitra(cid:34)on clause cons(cid:34)tutes an arbitra(cid:34)on agreement if the contract is in wri(cid:34)ng
and the reference is such as to make that arbitra(cid:34)on clause part of the contract.†While interpre(cid:34)ng Sec(cid:34)on 7 in Indowind, a two Judge Bench
of this Court held that:
“It is fundamental that a provision for arbitra(cid:34)on to cons(cid:34)tute an arbitra(cid:34)on agreement for the purpose of Sec(cid:34)on 7 should sa(cid:34)sfy two
condi(cid:34)ons: (i) it should be between the par(cid:34)es to the dispute; and (ii) it should relate to or be applicable to the dispute.†That was a case
where an agreement of sale was entered into between W and S. The agreement described S and its nominee as a buyer and as the promoter of
Indowind. Under the agreement, the seller agreed to transfer to the buyer certain assets for a considera(cid:34)on which was payable partly in cash
and partly by the issue of equity shares. The Board of Directors of W accorded approval to the agreement, as did the Board of S. No approval
was, however, granted by the Board of Directors of Indowind. According to W, certain disputes arose between it and S and Indowind on the
other. W filed a pe(cid:34)(cid:34)on under Sec(cid:34)on 11(6) against S and Indowind for appointment of a sole arbitrator. Indowind resisted the pe(cid:34)(cid:34)on on the
ground that it was not a party to the agreement which was entered into between W and S. The Chief Jus(cid:34)ce of the Madras High Court allowed
the applica(cid:34)on for appointment of an arbitrator, holding that though Indowind was not a signatory to the agreement, it was bound. In appeal,
this Court held that W had not entered into an agreement with Indowind, referring to the agreement which contained an arbitra(cid:34)on
agreement, with an intention to make the arbitration agreement a part of their agreement. In the view of this Court:
“..The ques(cid:34)on is when Indowind is not a signatory to the agreement dated 24-2-2006, whether it can be considered to be a “party†to
the arbitra(cid:34)on agreement. In the absence of any document signed by the par(cid:34)es as contemplated under clause (a) of sub-sec(cid:34)on (4) of
Sec(cid:34)on 7, and in the absence of existence of an arbitra(cid:34)on agreement as contemplated in clauses (b) or (c) of sub-sec(cid:34)on (4) of Sec(cid:34)on 7 and
in the absence of a contract which incorporates the arbitration agreement by reference as contemplated under sub-section (5) of Section 7, the
inescapable conclusion is that Indowind is not a party to the arbitra(cid:34)on agreement. In the absence of an arbitra(cid:34)on agreement between
Wescare and Indowind, no claim against Indowind or no dispute with Indowind can be the subject-ma(cid:75)er of reference to an arbitrator. This is
evident from a plain, simple and normal reading of Sec(cid:34)on 7 of the Act.†The fact that the agreement was entered into by S as the promoter
of Indowind and described the la(cid:75)er as its nominee and that the agreement was signed on behalf of S by a person who was also a director of
Indowind was held not to make any difference. This Court held that S and Indowind were two independent companies each of which was a
separate and dis(cid:34)nct legal en(cid:34)ty and the mere fact that the companies had common shareholders or a common Board of Directors will not
make them a single en(cid:34)ty. Nor could there be an inference that one company would be bound by the acts of the other. In the view of this
Court:
“..A contract can be entered into even orally. A contract can be spelt out from correspondence or conduct. But an arbitra(cid:34)on agreement is
different from a contract. An arbitra(cid:34)on agreement can come into existence only in the manner contemplated under Sec(cid:34)on 7. If Sec(cid:34)on 7
says that an arbitra(cid:34)on agreement should be in wri(cid:34)ng, it will not be sufficient for the pe(cid:34)(cid:34)oner in an applica(cid:34)on under Sec(cid:34)on 11 to show
that there existed an oral contract between the par(cid:34)es, or that Indowind had transacted with Wescare, or Wescare had performed certain acts
with reference to Indowind, as proof of arbitra(cid:34)on agreement.†15 The decision in Indowind was followed by a two Judge Bench in Prasad
(supra). The issue in that case was whether a guarantor to a loan who is not a party to a loan agreement between the lender and borrower
could be made a party to a reference to an arbitra(cid:34)on in regard to a dispute governing the repayment of the loan and be subjected to the
arbitral award. The loan agreement contained an arbitration clause. In the view of this Court:
“An arbitra(cid:34)on agreement between the lender on the one hand and the borrower and one of the guarantors on the other, cannot be
deemed or construed to be an arbitra(cid:34)on agreement in respect of another guarantor who was not a party to the arbitra(cid:34)on agreement.
Therefore, there was no arbitra(cid:34)on agreement as defined under Sec(cid:34)ons 7(4)(a) or (b) of the Act, insofar as the appellant was concerned,
though there was an arbitra(cid:34)on agreement as defined under Sec(cid:34)on 7(4)(a) of the Act in regard to the second and third respondents..â€
Consequently, the impleadment of the appellant as party to the arbitra(cid:34)on proceedings and the award were held to be unsustainable. The
principle which was formulated by the Court was this:
“..The Act makes it clear that an arbitrator can be appointed under the Act at the instance of a party to an arbitra(cid:34)on agreement only in
respect of disputes with another party to the arbitra(cid:34)on agreement. If there is a dispute between a party to an arbitra(cid:34)on agreement, with
other par(cid:34)es to the arbitra(cid:34)on agreement as also non-par(cid:34)es to the arbitra(cid:34)on agreement, reference to arbitra(cid:34)on or appointment of
arbitrator can be only with respect to the par(cid:34)es to the arbitra(cid:34)on agreement and not the non-par(cid:34)es.†16 Both these decisions were prior to
the three Judge Bench decision in Chloro Controls (supra). In Chloro Controls this Court observed that ordinarily, an arbitra(cid:34)on takes place
between persons who have been parties to both the arbitration agreement and the substantive contract underlying it.
English Law has evolved the “group of companies doctrine†under which an arbitra(cid:34)on agreement entered into by a company within a
group of corporate en(cid:34)(cid:34)es can in certain circumstances bind non-signatory affiliates. The test as formulated by this Court, no(cid:34)cing the
position in English law, is as follows:
“Though the scope of an arbitra(cid:34)on agreement is limited to the par(cid:34)es who entered into it and those claiming under or through them, the
courts under the English law have, in certain cases, also applied the “group of companies doctrineâ€. This doctrine has developed in the
interna(cid:34)onal context, whereby an arbitra(cid:34)on agreement entered into by a company, being one within a group of companies, can bind its non-
signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual inten(cid:34)on of all the par(cid:34)es was to bind both
the signatories and the non-signatory affiliates. This theory has been applied in a number of arbitra(cid:34)ons so as to jus(cid:34)fy a tribunal taking
jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement.
[Russell on Arbitra(cid:34)on (23rd Edn.)] This evolves the principle that a non-signatory party could be subjected to arbitra(cid:34)on provided these
transac(cid:34)ons were with group of companies and there was a clear inten(cid:34)on of the par(cid:34)es to bind both, the signatory as well as the non-
signatory par(cid:34)es. In other words, “inten(cid:34)on of the par(cid:34)es†is a very significant feature which must be established before the scope of
arbitra(cid:34)on can be said to include the signatory as well as the non-signatory par(cid:34)es.†The Court held that it would examine the facts of the
case on the touch-stone of the existence of a direct rela(cid:34)onship with a party which is a signatory to the arbitra(cid:34)on agreement, a ‘direct
commonality’ of the subject matter and on whether the agreement between the parties is a part of a composite transaction:
“A non-signatory or third party could be subjected to arbitra(cid:34)on without their prior consent, but this would only be in excep(cid:34)onal cases.
The court will examine these excep(cid:34)ons from the touchstone of direct rela(cid:34)onship to the party signatory to the arbitra(cid:34)on agreement, direct
commonality of the subject-ma(cid:75)er and the agreement between the par(cid:34)es being a composite transac(cid:34)on. The transac(cid:34)on should be of a
composite nature where performance of the mother agreement may not be feasible without aid, execu(cid:34)on and performance of the
supplementary or ancillary agreements, for achieving the common object and collec(cid:34)vely having bearing on the dispute. Besides all this, the
court would have to examine whether a composite reference of such par(cid:34)es would serve the ends of jus(cid:34)ce. Once this exercise is completed
and the court answers the same in the affirma(cid:34)ve, the reference of even non- signatory par(cid:34)es would fall within the excep(cid:34)on afore-Â
discussed.â€
 Explaining the legal basis that may be applied to bind a non-signatory to an arbitration agreement, this Court held thus:
“The first theory is that of implied consent, third-party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual
rights. This theory relies on the discernible inten(cid:34)ons of the par(cid:34)es and, to a large extent, on good faith principle. They apply to private as
well as public legal entities.
The second theory includes the legal doctrines of agent- principal rela(cid:34)ons, apparent authority, piercing of veil (also called “the alter
egoâ€), joint venture rela(cid:34)ons, succession and estoppel. They do not rely on the par(cid:34)es' inten(cid:34)on but rather on the force of the applicable
law.
We have already discussed that under the group of companies doctrine, an arbitra(cid:34)on agreement entered into by a company within a group of
companies can bind its non-signatory affiliates, if the circumstances demonstrate that the mutual inten(cid:34)on of the par(cid:34)es was to bind both the
signatory as well as the non-signatory par(cid:34)es.†The posi(cid:34)on in Indowind was formulated by a Bench of two Judges before the evolu(cid:34)on of
law in the three Judge Bench decision in Chloro Controls. Indowind arose out of a proceeding under Sec(cid:34)on 11(6). The decision turns upon a
construc(cid:34)on of the arbitra(cid:34)on agreement as an agreement which binds par(cid:34)es to it. The decision in Prasad evidently involved a guarantee,
where the guarantor who was sought to be impleaded as a party to the arbitral proceeding was not a party to the loan agreement between the
lender and borrower. The loan agreement between the lender and borrower contained an arbitra(cid:34)on agreement. The guarantor was not a
party to that agreement. 17 As the law has evolved, it has recognised that modern business transac(cid:34)ons are o(cid:80)en effectuated through
mul(cid:34)ple layers and agreements. There may be transac(cid:34)ons within a group of companies. The circumstances in which they have entered into
them may reflect an inten(cid:34)on to bind both signatory and non-signatory en(cid:34)(cid:34)es within the same group. In holding a non- signatory bound by
an arbitra(cid:34)on agreement, the Court approaches the ma(cid:75)er by a(cid:75)ribu(cid:34)ng to the transac(cid:34)ons a meaning consistent with the business sense
which was intended to be ascribed to them. Therefore, factors such as the rela(cid:34)onship of a non-signatory to a party which is a signatory to the
agreement, the commonality of subject ma(cid:75)er and the composite nature of the transac(cid:34)on weigh in the balance. The group of companies
doctrine is essen(cid:34)ally intended to facilitate the fulfilment of a mutually held intent between the par(cid:34)es, where the circumstances indicate
that the intent was to bind both signatories and non- signatories. The effort is to find the true essence of the business arrangement and to
unravel from a layered structure of commercial arrangements, an intent to bind someone who is not formally a signatory but has assumed the
obligation to be bound by the actions of a signatory.
18 Interna(cid:34)onal conven(cid:34)ons on arbitra(cid:34)on as well as the UNCITRAL Model Law mandate that an arbitra(cid:34)on agreement must be in wri(cid:34)ng.
Sec(cid:34)on 7 of the Arbitra(cid:34)on and Concilia(cid:34)on Act, 1996 affirms the same principle. Why does the law postulate that there should be a wri(cid:75)en
agreement to arbitrate? The reason is simple. An agreement to arbitrate excludes the jurisdic(cid:34)on of na(cid:34)onal courts. Where par(cid:34)es have
agreed to resolve their disputes by arbitra(cid:34)on, they seek to subs(cid:34)tute a private forum for dispute resolu(cid:34)on in place of the adjudicatory
ins(cid:34)tu(cid:34)ons cons(cid:34)tuted by the state. According to Redfern and Hunter on Interna(cid:34)onal Arbitra(cid:34)on, the requirement of an agreement to
arbitrate in wri(cid:34)ng is an elucida(cid:34)on of the principle that the existence of such an agreement should be clearly established, since its effect is to
exclude the authority of na(cid:34)onal courts to adjudicate upon disputes.10 19 Does the requirement, as in Sec(cid:34)on 7, that an arbitra(cid:34)on agreement
be in wri(cid:34)ng exclude the possibility of binding third par(cid:34)es who may not be signatories to an agreement between two contrac(cid:34)ng en(cid:34)(cid:34)es?
The evolving body of academic literature as well as adjudicatory trends indicate that in certain situa(cid:34)ons, an arbitra(cid:34)on agreement between
two or more parties may operate to bind other parties as well. Redfern and Hunter explain the theoretical foundation of this principle:
“..The requirement of a signed agreement in wri(cid:34)ng, however, does not altogether exclude the possibility of an arbitra(cid:34)on agreement
concluded in proper form between two or more par(cid:34)es also binding other par(cid:34)es. Third par(cid:34)es to an arbitra(cid:34)on agreement have been held to
be bound by (or en(cid:34)tled to rely on) such an agreement in a variety of ways: first, by opera(cid:34)on of the ‘group of companies’ doctrine
pursuant to which the benefits and du(cid:34)es arising from an arbitra(cid:34)on agreement may in certain circumstances be extended to other members
of the same group of companies; and, secondly, by opera(cid:34)on of general rules of private law, principally on assignment, agency, and
succession..11†The group of companies doctrine has been applied to pierce the corporate veil to locate the “true†party in interest, and
more significantly, to target the creditworthy member of a group of companies12. Though the extension of this doctrine is met with resistance
on the basis of the legal imputa(cid:34)on of corporate personality, the applica(cid:34)on of the doctrine turns on a construc(cid:34)on of the arbitra(cid:34)on
agreement and the circumstances rela(cid:34)ng to the entry into and performance of the underlying contract.13 Russel on Arbitra(cid:34)on14 formulates
the principle thus:
“Arbitra(cid:34)on is usually limited to par(cid:34)es who have consented to the process, either by agreeing in their contract to refer any disputes
arising in the future between them to arbitra(cid:34)on or by submi(cid:92)ng to arbitra(cid:34)on when a dispute arises. A party who has not so consented,
o(cid:80)en referred to as a third party or a non- signatory to the arbitra(cid:34)on agreement, is usually excluded from the arbitra(cid:34)on. There are however
some occasions when such a third party may be bound by the agreement to arbitrate. For example, …, assignees and representa(cid:34)ves may
become a party to the arbitra(cid:34)on agreement in place of the original signatory on the basis that they are successors to that party’s interest
and claim “through or under†the original party. The third party can then be compelled to arbitrate any dispute that arises.†Garry B Born
in his treatise on International Commercial Arbitration indicates that:
“The principal legal bases for holding that a non-signatory is bound (and benefi(cid:75)ed) by an arbitra(cid:34)on agreement … include both purely
consensual theories (e.g., agency, assumption, assignment) and nonconsensual theories (e.g. estoppel, alter ego)15â€.
Explaining the application of the alter ego principle in arbitration, Born notes:
“Authori(cid:34)es from virtually all jurisdic(cid:34)ons hold that a party who has not assented to a contract containing an arbitra(cid:34)on clause may
nonetheless be bound by the clause if that party is an “alter ego†of an en(cid:34)ty that did execute, or was otherwise a party to, the
agreement. This is a significant, but excep(cid:34)onal, departure from “the fundamental principle ... that each company in a group of companies
(a rela(cid:34)vely modern concept) is a separate legal en(cid:34)ty possessed of separate rights and liabili(cid:34)es16.†Explaining group of companies
doctrine, Born states :
“the doctrine provides that a non-signatory may be bound by an arbitra(cid:34)on agreement where a group of companies exists and the par(cid:34)es
have engaged in conduct (such as nego(cid:34)a(cid:34)on or performance of the relevant contract) or made statements indica(cid:34)ng the inten(cid:34)on assessed
objec(cid:34)vely and in good faith, that the non-signatory be bound and benefi(cid:75)ed by the relevant contracts.17†While the alter ego principle is a
rule of law which disregards the effects of incorpora(cid:34)on or separate legal personality, in contrast the group of companies doctrine is a means
of identifying the intentions of parties and does not disturb the legal personality of the entities in question. In other words :
“the group of companies doctrine is akin to principles of agency or implied consent, whereby the corporate affilia(cid:34)ons among dis(cid:34)nct legal
en(cid:34)(cid:34)es provide the founda(cid:34)on for concluding that they were intended to be par(cid:34)es to an agreement, notwithstanding their formal status as
non-signatories.18†20 The decision in Indowind arose from an applica(cid:34)on under Sec(cid:34)on 11 of the Arbitra(cid:34)on and Concilia(cid:34)on Act 1996.
Indowind was not a signatory to the contract and was held not to be a party to the agreement to refer disputes to arbitra(cid:34)on. Indowind held
that an applica(cid:34)on under Sec(cid:34)on 11 was not maintainable. The present case does not envisage a situa(cid:34)on of the kind which prevailed before
this Court in Indowind. The present case relates to a post award situa(cid:34)on. The enforcement of the arbitral award has been sought against the
appellant on the basis that it claims under KCP and is bound by the award.
Sec(cid:34)on 35 of the Arbitra(cid:34)on and Concilia(cid:34)on Act 1996 postulates that an arbitral award “shall be final and binding on the par(cid:34)es and
persons claiming under them respec(cid:34)velyâ€. The expression ‘claiming under’, in its ordinary meaning, directs a(cid:75)en(cid:34)on to the source of
the right. The expression includes cases of devolu(cid:34)on and assignment of interest (Advanced Law Lexicon by P Ramanatha Aiyar19). The
expression “persons claiming under them†in Sec(cid:34)on 35 widens the net of those whom the arbitral award binds. It does so by reaching out
not only to the par(cid:34)es but to those who claim under them, as well. The expression “persons claiming under them†is a legisla(cid:34)ve
recogni(cid:34)on of the doctrine that besides the par(cid:34)es, an arbitral award binds every person whose capacity or posi(cid:34)on is derived from and is the
same as a party to the proceedings. Having derived its capacity from a party and being in the same posi(cid:34)on as a party to the proceedings binds
a person who claims under it. The issue in every such a case is whether the person against whom the arbitral award is sought to be enforced is
one who claims under a party to the agreement.
21 Mr Sibal has sought to make a dis(cid:34)nc(cid:34)on between the provisions of Sec(cid:34)on 45 and the unamended Sec(cid:34)on 8. Sec(cid:34)on 45, forms a part of
Part II dealing with the enforcement of foreign awards to which the New York Conven(cid:34)on applies. It contemplates a reference by a judicial
authority to arbitra(cid:34)on at the request of one of the par(cid:34)es ‘or any person claiming through or under him’, where there is an arbitra(cid:34)on
agreement. The submission of Mr Sibal is that a similar expression (‘any person claiming through or under him’) has been introduced in
the amended provisions of Sec(cid:34)on 8 (subs(cid:34)tuted by Act 3 of 2016 with effect from 23 October 2015) but that this expression did not find place
in the unamended provision. The submission is a non-sequitur. Both Sec(cid:34)ons 8 and 45 operate in the sphere of the duty of a judicial authority
to refer par(cid:34)es to arbitra(cid:34)on. In the present case Sec(cid:34)on 35 is the material provision, which expressly s(cid:34)pulates that an arbitral award is, final
and binding not only on the par(cid:34)es but on persons claiming under them. 22 The submission which was urged on behalf of the appellant,
proceeds on the basis that since the appellant was not impleaded as a party to the arbitral proceedings, proceedings for the enforcement of
the award will not lie against it. This line of submissions clearly misses the central facet of Sec(cid:34)on 35, which is that a person who claims under
a party is bound by the award. The fact that the appellant was not a party to the arbitral proceedings will not conclude the ques(cid:34)on as to
whether the award can be enforced against it on the ground that it claims under a party. Essen(cid:34)ally, the Court is called upon to consider
whether the test embodied in Section 35 is fulfilled in the present case, so as to bind the appellant.
23 Under the agreement dated 19 July 2004, KCP was to be offered 243 lakh equity shares of KSL for a considera(cid:34)on of Rs 2.31 crores. The intent
of the par(cid:34)es, as evinced in clause 6 of the agreement, was that KCP would take over the business, assets and liabili(cid:34)es of SPIL. KCP was to
discharge those liabili(cid:34)es of SPIL which were specified in Schedules 2 and 3 of the agreement. Clause 14 of the agreement recognises, on the
part of KSL, the right of KCP to sell or transfer his holding in SPIL “provided the proposed transferees accept the terms and condi(cid:34)ons
men(cid:34)oned in this agreement†for the management of SPIL and related financial aspects covered by this agreement. Significantly, on 17
August 2004, KCP addressed a le(cid:75)er to KSL ac(cid:34)ng as the authorised signatory of the appellant. The le(cid:75)er contains a clear and categoric
reference to the Share Purchase Agreement dated 19 July 2004. The appellant in(cid:34)mated to KSL that it was in pursuance of the said agreement
that KSL had agreed to sell and “our group of companies by this agreement and/or by themselves and/or by their nominees have agreed to
purchase shares†in SPIL of a face value of Rs 2430 lakhs for a sum of Rs 2.43 crores. Accordingly, the appellant indicated that it was remi(cid:92)ng
seven share transfer deeds duly executed and requested KSL to lodge them, upon execu(cid:34)on, with SPIL. The par(cid:34)es in whose favour the
transfers were to be registered were described as group companies. It was indicated that a supplementary agreement would be drawn up to
reflect the altered consideration.
24 The record establishes that the transfer of shares by KCP to his nominees was to be on the express condi(cid:34)on that the nominee would abide
by the terms of the agreement in rela(cid:34)on to the take over of the management of SPIL and related financial aspects. The appellant, while
purchasing the shares, was not merely aware of the agreement dated 19 July 2004 but expressly sought the allotment of shares in pursuance to
it, to its group companies. In this background, it will not be open to the appellant to contend that while it was bound by all other terms of the
agreement dated 19 July 2004, it would not be bound by the arbitra(cid:34)on agreement contained in the very same agreement. The arbitral award,
as we have no(cid:34)ced, a(cid:75)ained finality a(cid:80)er all a(cid:75)empts to raise objec(cid:34)ons to it failed before the High Court and, later, before this Court. The
appellant, in purchasing the shares, was conscious of and accepted the terms of the agreement dated 19 July 2004. Its le(cid:75)er dated 17 August
2004 leaves no manner of doubt of the acceptance of this posi(cid:34)on. 25 The appellant ques(cid:34)ons the applica(cid:34)on of the Chloro Controls doctrine.
Dr Singhvi urged that in Chloro Controls there was a joint venture agreement; the mother or parent agreement contained an arbitra(cid:34)on clause
and though the ancillary agreements did not contain an arbitra(cid:34)on agreement, they could not have been performed in the absence of the
mother agreement. The submission proceeds on a constricted interpreta(cid:34)on of the Chloro Controls dictum. The principle which underlies
Chloro Controls is that an arbitra(cid:34)on agreement which is entered into by a company within a group of companies may bind non- signatory
affiliates, if the circumstances are such as to demonstrate the mutual inten(cid:34)on of the par(cid:34)es to bind both signatories and non-signatories. In
applying the doctrine, the law seeks to enforce the common inten(cid:34)on of the par(cid:34)es, where circumstances indicate that both signatories and
non-signatories were intended to be bound. In Duro (supra), the case was held to stand on a different foo(cid:34)ng since all the five different
packages as well as the corporate guarantee did not depend on the terms and condi(cid:34)ons of the original package nor on the memorandum of
understanding executed between the par(cid:34)es. The judgment in Duro does not detract from the principle which was enunciated in Chloro
Controls.
26 In the present case, as we have seen, the parent agreement dated 19 July 2004 envisaged the allotment of equity shares of KSL to KCP with
the intent that KCP would take over the business, assets and liabili(cid:34)es of SPIL. While KCP was en(cid:34)tled to transfer his shareholding, this was
expressly subject to the condi(cid:34)on of the acceptance by the transferee of the terms and condi(cid:34)ons of the agreement. KCP’s le(cid:75)er dated 17
August 2004 to KSL contains a specific reference to the share purchase agreement dated 19 July 2004. It was in pursuance of that agreement
that KCP indicated, as authorised signatory of the appellant, that his group of companies had agreed to purchase the shares in SPIL. The shares
were to be purchased by several en(cid:34)(cid:34)es in the same group. A supplementary agreement was to be entered into, to reflect the altered
considera(cid:34)on. Eventually, no supplementary agreement was executed and the transac(cid:34)on was structured on the basis of the parent
agreement dated 19 July 2004 which the appellant recognised in its le(cid:75)er dated 17 August 2004. Having regard to this factual context, the
defence of the appellant against the enforcement of the award cannot be accepted. To allow such a defence to prevail would be to cast the
mutual intent of the parties to the winds and to put a premium on dishonesty.
27 The arbitral award envisaged that KSL was en(cid:34)tled to the return of documents of (cid:34)tle and the cer(cid:34)ficates pertaining to the shares of SPIL
contemporaneously with the payment or tendering of a sum of Rs 3.58 crores together with interest. KSL is in terms of the arbitral award
en(cid:34)tled to the share cer(cid:34)ficates. That necessarily means the transfer of the share cer(cid:34)ficates. To effectuate the transfer, recourse to the
remedy of the rec(cid:34)fica(cid:34)on of the register under Sec(cid:34)on 111 was but appropriate and necessary. The arbitral award has the character of a
decree of a civil court under Sec(cid:34)on 36 and is capable of being enforced as if it were a decree. Armed with that decree, KSL was en(cid:34)tled to
seek rec(cid:34)fica(cid:34)on before the NCLT by invoking the provisions of Sec(cid:34)on 111 of the Companies Act, 1956. There can be, therefore, no ques(cid:34)on
about the jurisdiction of NCLT to pass an appropriate order directing rectification of the register.
28 We have not been impressed with the submission that the applica(cid:34)on by KSL to the NCLT was not maintainable since the Tribunal has no
power to execute an arbitral award. The submission proceeds on finding of the Tribunal that the purpose of the pe(cid:34)(cid:34)on before it was to
implement the award dated 16 December 2009 and that its ul(cid:34)mate direc(cid:34)on is to the same effect. The submission relies on the provisions of
Section 42 of the 1996 Act which provides as follows:
“42. Jurisdic(cid:34)on. -Notwithstanding anything contained elsewhere in this Part or in any other law for the (cid:34)me being in force, where with
respect to an arbitra(cid:34)on agreement any applica(cid:34)on under this Part has been made in a court, that court alone shall have jurisdic(cid:34)on over the
arbitral proceedings and all subsequent applica(cid:34)ons arising out of that agreement and the arbitral proceedings shall be made in that court and
in no other court.†While dealing with the submission it is necessary to note that the award of the arbitral tribunal mandates that the
appellant must return the share cer(cid:34)ficates rela(cid:34)ng to 2.43 crore shares of SPIL which were handed over in terms of the agreement dated 19
July 2004 against the payment of the considera(cid:34)on s(cid:34)pulated in the award. The transfer of the share cer(cid:34)ficates by the appellant will be
effectual only by the rec(cid:34)fica(cid:34)on of the register of the company. The mere handing over of a share cer(cid:34)ficates will not cons(cid:34)tute due
implementa(cid:34)on of the award. The award contemplates the transmission of the shares which stood in the name of the appellant in pursuance
of the agreement dated 19 July 2004, to the claimant in the arbitral proceedings. This necessitated an applica(cid:34)on under Sec(cid:34)on 111 for the
purpose of securing a rec(cid:34)fica(cid:34)on of the register. Sub-sec(cid:34)on 4 of Sec(cid:34)on 111 deals with a situa(cid:34)on where a default is made in entering in the
register, the fact of any person having become a member of the company. Under sub-sec(cid:34)on 5 while hearing the appeal, the Tribunal is
entitled to direct that the transfer or transmission shall be registered by the company and to order rectification of the register.
29 In the present case, the arbitral award required the shares to be transmitted to the claimants. The arbitral award attained finality. The award
could be enforced in accordance with the provisions of the Code of Civil Procedure, in the same manner as if it were a decree of the Court. The
award postulates a transmission of shares to the claimant. The direc(cid:34)ons contained in the award can be enforced only by moving the Tribunal
for rectification in the manner contemplated by law.
30 The reliance which has been sought to be placed on the provisions of Sec(cid:34)on 42 of the 1996 Act is inapposite. Dr Singhvi relied on the
decision in State of West Bengal v Associated Contractors(2015) 1 SCC 32.. The principle which was enunciated in the judgment of this Court
was as follows:
“If an applica(cid:34)on were to be preferred to a court which is not a Principal Civil Court of original jurisdic(cid:34)on in a district or a High Court
exercising original jurisdic(cid:34)on to decide ques(cid:34)ons forming the subject ma(cid:75)er of an arbitra(cid:34)on if the same had been the subject ma(cid:75)er of a
suit, then obviously such applica(cid:34)on would be outside the four corners of Sec(cid:34)on 42. If, for example, an applica(cid:34)on were to be filed in a court
inferior to a Principal Civil Court, or to a High Court which has no original jurisdic(cid:34)on, or if an applica(cid:34)on were to be made to a court which has
no subject-ma(cid:75)er jurisdic(cid:34)on, such applica(cid:34)on would be outside Sec(cid:34)on 42 and would not debar subsequent applica(cid:34)ons from being filed in
a court other than such court.†The conclusion of the Court is in the following terms:
“(a) Sec(cid:34)on 2(1)(e) contains an exhaus(cid:34)ve defini(cid:34)on marking out only the Principal Civil Court of Original Jurisdic(cid:34)on in a district or a High
Court having original civil jurisdiction in the State, and no other court as “court†for the purpose of Part I of the Arbitration Act, 1996.
(b) The expression “with respect to an arbitra(cid:34)on agreement†makes it clear that Sec(cid:34)on 42 will apply to all applica(cid:34)ons made whether
before or during arbitral proceedings or after an award is pronounced under Part I of the 1996 Act.
(c) However, Sec(cid:34)on 42 only applies to applica(cid:34)ons made under Part I if they are made to a court as defined. Since applica(cid:34)ons made under
Sec(cid:34)on 8 are made to judicial authori(cid:34)es and since applica(cid:34)ons under Sec(cid:34)on 11 are made to the Chief Jus(cid:34)ce or his designate, the judicial
authority and the Chief Justice or his designate not being court as defined, such applications would be outside Section 42.
(d) Sec(cid:34)on 9 applica(cid:34)ons being applica(cid:34)ons made to a court and Sec(cid:34)on 34 applica(cid:34)ons to set aside arbitral awards are applica(cid:34)ons which are
within Section 42.
(e) In no circumstances can the Supreme Court be “court†for the purposes of Sec(cid:34)on 2(1)(e), and whether the Supreme Court does or
does not retain seisin a(cid:80)er appoin(cid:34)ng an arbitrator, applica(cid:34)ons will follow the first applica(cid:34)on made before either a High Court having
original jurisdiction in the State or a Principal Civil Court having original jurisdiction in the district, as the case may be.
(f) Section 42 will apply to applications made after the arbitral proceedings have come to an end provided they are made under Part I.
(g) If a first application is made to a court which is neither a Principal Court of Original Jurisdiction in a district or a High Court exercising original
jurisdic(cid:34)on in a State, such applica(cid:34)on not being to a court as defined would be outside Sec(cid:34)on 42. Also, an applica(cid:34)on made to a court
without subject-ma(cid:75)er jurisdic(cid:34)on would be outside Sec(cid:34)on 42.†31 More recently in Sundaram Finance Limited v Abdul Samad(2018) 2
SCALE 467, this Court considered the divergence of legal opinion in the High Courts on the ques(cid:34)on as to whether an award under the 1996 Act
is required to be first filed in the Court having jurisdic(cid:34)on over the arbitral proceedings for execu(cid:34)on, to be followed by a transfer of the
decree or whether the award could be filed and executed straight-away in the Court where the assets are located. Dealing with the provisions
of Section 36, Justice Sanjay Kishan Kaul observed thus:
“The aforesaid provision would show that an award is to be enforced in accordance with the provisions of the said code in the same manner
as if it were a decree. It is, thus, the enforcement mechanism, which is akin to the enforcement of a decree but the award itself is not a decree
of the civil court as no decree whatsoever is passed by the civil court. It is the arbitral tribunal, which renders an award and the tribunal does
not have the power of execu(cid:34)on of a decree. For the purposes of execu(cid:34)on of a decree the award is to be enforced in the same manner as if it
was a decree under the said Code.†Explaining the provisions of Section 42 the Court held that:
“The aforesaid provision, however, applies with respect to an applica(cid:34)on being filed in Court under Part I. The jurisdic(cid:34)on is over the
arbitral proceedings. The subsequent applica(cid:34)on arising from that agreement and the arbitral proceedings are to be made in that court alone.
However, what has been lost sight of is Section 32 of the said Act, which reads as under: “32.
Termina(cid:34)on of proceedings.â€" (1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral
tribunal under sub-sec(cid:34)on (2). (2) The arbitral tribunal shall issue an order for the termina(cid:34)on of CIVIL APPEAL No.1650 of 2018 Page 17 of 21
the arbitral proceedings whereâ€" (a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal
recognises a legi(cid:34)mate interest on his part in obtaining a final se(cid:75)lement of the dispute, (b) the par(cid:34)es agree on the termina(cid:34)on of the
proceedings, or (c) the arbitral tribunal finds that the con(cid:34)nua(cid:34)on of the proceedings has for any other reason become unnecessary or
impossible. (3) Subject to sec(cid:34)on 33 and sub-sec(cid:34)on (4) of sec(cid:34)on 34, the mandate of the arbitral tribunal shall terminate with the termina(cid:34)on
of the arbitral proceedings.â€
19.The aforesaid provision provides for arbitral proceedings to be terminated by the final arbitral award. Thus, when an award is already made,
of which execu(cid:34)on is sought, the arbitral proceedings already stand terminated on the making of the final award. Thus, it is not appreciated
how Sec(cid:34)on 42 of the said Act, which deals with the jurisdic(cid:34)on issue in respect of arbitral proceedings, would have any relevance..â€
Consequently, in the view of the Court, the enforcement of an award through its execu(cid:34)on can be ini(cid:34)ated anywhere in the country where
the decree can be executed and there is no requirement of obtaining a transfer of the decree from the Court which would have jurisdic(cid:34)on
over the arbitral proceedings.
32 In the present case, the arbitral award, in essence, postulates the transmission of shares from the appellant to the claimant. The only
remedy available for effectua(cid:34)ng the transmission is that which was provided in Sec(cid:34)on 111 for seeking a rec(cid:34)fica(cid:34)on of the register. There is,
therefore, no merit in the challenge addressed by the appellant.
33 We may also note the fact that in the proceedings before the Madras High Court under Sec(cid:34)on 9, it was held that the purchase of shares by
the appellant was as a nominee of KCP and not by way of an independent right. The purchase was held to be referable to the agreement dated
19 July 2004. There has been no challenge to this finding.
The Madras High Court held thus:
“The reading of the le(cid:75)er issued by the third respondent seeking transfer and registra(cid:34)on of shares shown that reference was made to the
agreement dated 19.7.2004 which was in dispute before the Arbitra(cid:34)on Tribunal. Nothing has been produced on record to show, if any fresh
agreement was executed as suggested in the le(cid:75)er, seeking transfer of shares in favour of the person men(cid:34)oned in the le(cid:75)er wri(cid:75)en by the
third respondent, nor any documents have been placed on record to show as to whether the respondent took over the liabili(cid:34)es, which were
met by the applicant, and finally held to be binding on first respondent.
In the absence of execu(cid:34)on of new agreement, no other conclusion then the one that the transac(cid:34)on was in terms of the agreement, entered
into between the parties to arbitration can be arrived at.†..
“At the sake of repe(cid:34)(cid:34)on, it may be men(cid:34)oned that the reading of the le(cid:75)er dated 18.8.2004 on which reliance was placed by the third
respondent shows that clear reference was made to the agreement dated 19.7.2004 entered into between the applicant and the first
respondent.†The High Court further held thus:
“The respondents 3 to 6 have purchased the shares, as nominees of the first respondent and not as of independent right. No material other
than the agreement dated 19.7.2004 has been placed on record to show that the respondents 3 to 6 exercises their independent right to
purchase the shares.†..
“The conten(cid:34)on of Mr. V. Prakash, learned Senior counsel that the respondents 4 to 6 cannot be treated as nominees of the first
respondent cannot be sustained, as shares were transferred, in pursuance to the le(cid:75)er dated 18.8.2004 addressed by the third respondent, for
registration of the transfer deed by referring to the agreement dated 19.7.2004.
Thus, the second ques(cid:34)on is also answered by holding that the respondents 2 to 6 purchased the shares, as the nominees of the first
respondent.†We have referred to the above findings for the completeness of the record. These findings of the Madras High Court would
indicate that virtually everyone of the submission which was urged before this Court have been negatived.
34 Finally, having covered the en(cid:34)re gamut of submissions which were urged on behalf of the appellant, it would be worthwhile to revisit the
fundamental principles which were formulated nearly fi(cid:80)y years ago in a judgment of a three judge Bench of this Court in Sa(cid:34)sh Kumar v
Surinder Kumar(1969) 2 SCR 244. That case arose under the provisions of the Indian Arbitra(cid:34)on Act 1940. The ques(cid:34)on which arose before this
Court was whether an award under the Act requires registra(cid:34)on under Sec(cid:34)on 17(1)(b) of the Registra(cid:34)on Act, if it effects par(cid:34)(cid:34)on of
immovable property above the value of Rs 100. A Full Bench of the Patna High Court held that unless a decree is passed in terms of the award
(in terms of the posi(cid:34)on as it stood under the 1940 Act) it had no legal effect. In holding thus, the Patna High Court had relied upon a Punjab
Full Bench decision holding that under the Arbitra(cid:34)on Act 1940, an award was effec(cid:34)ve only when a decree follows a judgment on the award.
The Punjab Full Bench held that even if the award is registered, it is s(cid:34)ll a ‘waste paper’ unless it is made a rule of the court. In appeal,
this Court held that the two Full Benches had taken a view contrary to that formulated in an unreported decision of this Court in U(cid:75)am Singh
Duggal & Co v Union of India23 where it was held thus:
“The true legal posi(cid:34)on in regard to the effect of an award is not in dispute. It is well se(cid:75)led that as a general rule, all claims which are the
subject-ma(cid:75)er of a reference to arbitra(cid:34)on merge in the award which is pronounced in the proceedings before the arbitrator and that a(cid:80)er an
award has been pronounced, the rights and liabili(cid:34)es of the par(cid:34)es in respect of the said claims can be determined only on the basis of the
said award.
A(cid:80)er an award is pronounced, no ac(cid:34)on can be started on the original claim which had been the subject-ma(cid:75)er of the reference. As has been
observed by Mookerjee, J., in the  case of Bhajahari Saha Banikya v. Behary Lal Basak [33 Col 881 at p 898] the award is, in fact, a final
adjudica(cid:34)on of a Court of the par(cid:34)es own choice, and un(cid:34)l impeached upon sufficient grounds in an appropriate proceeding, an award, which
is on the fact of it regular, is conclusive upon the merits of the controversy submi(cid:75)ed, unless possibly the par(cid:34)es have intended that the
award shall not be final and conclusive … in reality, an award possesses all the elements of vitality, even though it has not been formally
enforced, and it may be relied upon in a li(cid:34)ga(cid:34)on between the par(cid:34)es rela(cid:34)ng to the same subject-ma(cid:75)erâ€. This conclusion, according to the
learned Judge, is based upon the elementary principle that, as between the par(cid:34)es and their privies, an award is en(cid:34)tled to that respect which
is due to the judgment of a court of last resort. Therefore, if the award which has been pronounced between the par(cid:34)es has in fact, or can, in
law, be deemed to have dealt with the present dispute, the second reference would be incompetent. This posi(cid:34)on also has not been and
cannot be seriously disputed.†(emphasis supplied) The above posi(cid:34)on was followed in Sa(cid:34)sh Kumar (supra) as sta(cid:34)ng a binding principle of
law. The earlier decision was reiterated in the following observations:
“In our opinion this judgment lays down that the posi(cid:34)on under the Act is in no way different from what it was before the Act came into
force, and that an award has some legal force and is not a mere waste paper. If the award in ques(cid:34)on is not a mere waste paper but has some
legal effect it plainly purports to or affects property within the meaning of Sec(cid:34)on 17(1)(b) of the Registra(cid:34)on Act.†(emphasis supplied) The
present case which arises under the Arbitra(cid:34)on and Concilia(cid:34)on Act 1996 stands on even a higher pedestal. Under the provisions of Sec(cid:34)on 35,
the award can be enforced in the same manner as if it were a decree of the Court.
The award has a(cid:75)ained finality. The transmission of shares as mandated by the award could be fully effectuated by obtaining a rec(cid:34)fica(cid:34)on of
the register under Sec(cid:34)on 111 of the Companies Act. The remedy which was resorted to was competent. The view of the NCLT, which has been
affirmed by the NCLAT does not warrant interference.
35 For the above reasons, we are of the view that the appeals are lacking in merit. The appeals shall stand dismissed.
