Interpretation Of The Supreme Court's View On Confidentiality In Arbitration

INTRODUCTION

Arbitration has consistently regarded confidentiality as a key determinant in commercial disputes for parties to choose arbitration over traditional litigation. In Kamal Gupta v. M/s L.R. Builders Private Limited¹, the Supreme Court affirmed this principle, holding that confidentiality is not simply a matter of procedural flexibility, but a statutory obligation under the Arbitration and Conciliation Act, 1996 ("the Act"). Through this order, the Supreme Court reinstated the privity of participation in arbitration proceedings and clarified that only those that are parties to an arbitration agreement may participate in arbitration proceedings.

In this judgment, the Court ruled that allowing the non-signatory to participate in proceedings would be a violation of Section 42A of the Act. Furthermore, the judgment also highlighted the principle of functus officio that once an arbitrator has been appointed, the court ceases to possess jurisdiction over the arbitration process.

BACKGROUND OF THE CASE

Facts

The dispute arose as a result of a family settlement between Pawan Gupta and Kamal Gupta, which was first concluded in 2015 and subsequently formalized through a Memorandum of Understanding ("MoU") / Family Settlement Deed ("FSD") in 2019. According to the MoU, Rahul Gupta, son of Kamal Gupta, was not included among the signatories.

Following the invocation of the arbitration clause, Rahul Gupta and other non-signatory entities sought permission from the Delhi High Court to attend the arbitral proceedings and access case records, asserting indirect interests in the subject matter. The High Court, through an order dated March 22, 2024, appointed a sole arbitrator under Section 11(6) of the Act and declined to accept the request. However, later through subsequent orders in November 2024, permission was given to non-signatories to attend the proceedings, relying upon its inherent powers.

The signatories aggrieved by this direction approached the Supreme Court, contending that such participation would infringe the confidentiality obligations as stated in Section 42A of the Act and that the High Court, having already disposed of the application had become functus officio.

Court's Ruling

1. Signatories as the Sole Participants
   It was ruled by the Hon'ble Court that a final arbitration award is only binding on the parties to the arbitration agreement and on any claimants under it as referred to under Section 35 of the Act. A non-signatory, thus, cannot attend arbitral proceedings as they do not qualify as a 'party' under Section 2(h) of the Act. Consequently, attendance or participation by a non-signatory, who is not bound by the arbitral award, is a course "unknown to law." The Court further distinguished between the principle of being bound by an arbitral award and the right to attend hearings of an arbitral tribunal. Even in cases where doctrines such as the Group of Companies Doctrine², agency, or estoppel might extend the binding force of an award to non-signatories, such persons do not acquire the procedural right to observe or participate in the proceedings.
2. Confidentiality under Section 42A
   The judgment accords statutory sanctity to arbitration confidentiality. The Court emphasized that Section 42A, introduced by the Arbitration and Conciliation (Amendment) Act, 2019, mandates confidentiality across all stages of the arbitration, binding the arbitrator, the arbitral institution, and the parties. Thereby, allowing non-signatories to remain present would, in the Court's view, breach this statutory obligation, as such persons are neither bound by the duty of confidentiality nor accountable for its violation. In doing so, the Court effectively strengthened confidentiality merely from a contractual term of convenience to a statutory command, aligning Indian law with confidentiality standards recognised in leading arbitral jurisdictions such as Singapore and the United Kingdom.
3. The Principle of Functus Officio and Judicial Restraint
   Similarly, the Court has reaffirmed that once an arbitrator is appointed under Section 11(6), the appointing court becomes functus officio. It cannot entertain any subsequent procedural applications, including those seeking to have non-signatory attend the proceeding. The Supreme Court emphasized that the Act is a self-contained code, and Section 5 expressly prohibits judicial intervention except in limited circumstances. As a consequence, the Court held that Section 151 of the Code of Civil Procedure, 1908 cannot be invoked for such attendance. In addition, Section 5's 'negative facet' further prohibits any judicial intervention not provided for in Part I³.
   Accordingly, the Court imposed costs of ₹3,00,000 on the non-signatories, which must be paid to the Supreme Court Advocates-on-Record Association within two weeks. This ruling signal a clear disapproval of any unnecessary interference in arbitral proceedings.

ANALYSIS AND IMPLICATIONS

1. Reassertion of Party Autonomy and Privacy
   This decision reinforces the doctrine of party autonomy, which forms the basis of arbitral jurisprudence. This judgment establishes that two interrelated principles are involved, namely, that arbitration is consensual and confidentiality is a statutory requirement. The ruling also emphasizes the importance of careful drafting of arbitration clauses in multi-party commercial arrangements. In the event that a corporate group wishes to invite a larger number of participants (e.g., affiliates, observers), this must be agreed upon in advance. It is unlikely that, in retrospect, a judicial invitation to non-signatories would be recognized.
2. Demarcation between Binding Effect and Procedural Right
   Doctrinal clarity is provided by the Court's distinction between the binding effect of an award and the right to participate in proceedings. It should be noted that although a non-signatory may ultimately be bound under established principles, he or she is not entitled to claim procedural parity with signatories. Through this distinction, the closed, consensual nature of arbitration can be preserved without dilution of the procedural rules.
3. Impact on Multi-Party Arbitration and Group of Companies
   The ruling emphasizes that, for business arrangements that involve multiple parties that is holding groups, family concerns or joint ventures, a non-signatory may become bound later, but such binding status does not automatically confer the right to participate in the proceedings. As a result, companies must either (i) require affiliates to sign the arbitration agreement; or (ii) create explicit accession/open observer clauses; or (iii) develop separate mechanisms for third-party rights.

PRACTICAL CONSEQUENCES FOR COMPANIES

The Supreme Court's decision has significant implications for corporations and their legal departments who are responsible for managing contractual risks and preparing arbitration strategies. It highlights the importance of drafting clauses of arbitration with precision, ensuring that all parties such as affiliates or subsidiaries that are intended to be bound, are explicitly included as signatories. In the absence of such formalities, related parties may be excluded from participation, even if they possess legitimate commercial interests in the dispute.

As a result of the decision, the concept of confidentiality is now a statutory requirement, as defined in Section 42A, which requires arbitral information to be maintained securely and disclosed only to authorized representatives bound by comparable confidentiality undertakings.

It is imperative that practitioners take a proactive approach to arbitration governance as a result of the judgment. At the contract and tribunal-constitution stages, procedural and evidentiary issues should be considered, including confidentiality protocols and access rights, since post-appointment judicial intervention will be limited.

It is therefore important for corporate legal departments to incorporate robust information handling policies and contractual safeguards into their dispute management frameworks in order to comply with the statutory confidentiality regime. It reinforces both privacy and finality, thereby enhancing India's position as an arbitration jurisdiction that is predictable and self-contained.

GLOBAL COMPARISON

International arbitration regimes have historically taken a variety of approaches to confidentiality. Comparatively, the LCIA Rules⁴ and SIAC Rules⁵ incorporate express confidentiality undertakings, while the ICC Rules⁶ allow arbitrators discretion to maintain confidentiality. As opposed to other countries, India approaches confidentiality under Section 42A in a more categorical manner since it requires confidentiality in all instances.

Indian arbitration practice is now more consistent with Singaporean and English models, which treat confidentiality as a default legal principle, although there are some exceptions for enforcement, regulation compliance, and public interest disclosures. As a result of this decision, India has strengthened its reputation as an emerging arbitration center by aligning its arbitration jurisprudence with best practices from around the world.

CONCLUSION

As a result of the Court's decision in Kamal Gupta v. M/s L.R. Builders Private Limited, India's arbitral jurisprudence has undergone a significant development. This decision has strengthened the integrity and finality of the arbitration process by restricting participation to signatory parties, elevating confidentiality to a statutory level, and reaffirming the concept of functus officio.

In accordance with the decision, arbitration in India is intended to be a private, consensual, and self-contained process free from external intrusion, except in cases where explicit legislation permits it to do so. In essence, the case emphasizes the fact that confidentiality in arbitration is not merely an ethical expectation, but a statutory requirement defining the modern Indian arbitral framework.

Footnotes

1. 2025 INSC 975

2. Cox and Kings Ltd. v. SAP India Pvt Ltd & Anr. Arbitration Petition No. 38 of 2020

3. Nimet Resources INC vs. Essar Steels Limited, (2009) 17 SCC 313

4. London Court of International Arbitration

5. Singapore International Arbitration Centre (SIAC)

6. International Chamber of Commerce

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