Recently, in the case of KKH Finvest Pvt. Ltd. and another v. Ashiesh Shukla and others, the Hon’ble Supreme Court held that a non-signatory’s active participation in performing an underlying contract can, by itself, be enough to bind that party to the arbitration clause contained in it.

The Court set aside a Delhi High Court order that had excluded a shareholder-respondent from arbitration proceedings solely on grounds of being a non-signatory to a Memorandum of Settlement (MoS), despite the fact that a connected Share Purchase Agreement (SPA) was executed on the same day by the shareholder-respondent, to give effect to the transaction contemplated under the MoS. 

The Court reasoned that the respondent-shareholder’s conduct, executing the SPA, acknowledging the MoS, and transferring shares as part of the composite settlement, demonstrated an intention to be bound, regardless of his non-signatory status. The respondent-shareholder’s performance was found integral to completing the settlement contemplated under the MoS.

Relying on the Constitution Bench’s group-of-companies doctrine in Cox and Kings v. SAP India (2023) and on ONGC v. Discovery Enterprises (2022), the Court reaffirmed that where transactions are composite and disputes are closely interlinked, a non-signatory’s conduct and role in performance can outweigh the absence of a signature.