Ensure that Arbitration Agreement applies to all necessary parties

If a party to a claim before an arbitral tribunal is a necessary party without whose presence no effective adjudication is possible and against whom there may a claim or any other relief sought, it is essential that such a party is a party to the arbitration agreement. Arbitration is a creation of the contractual arrangement between parties to the agreement. If there is a dispute in relation to certain parties of which one or more are not at all parties to the arbitration agreement, the best course of action is a civil suit only. It would be futile to waste time in initiating any arbitration claim. If the non-party, at the time of request for arbitration and at the time of establishement of arbitral tribunal does not object, one may argue that he has consented to be a party to the arbitration agreement. Conversely it is incumbent upon every non-party to object to his being arrayed as a party in any arbitration proceedings. Even at the stage of Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside an award, a non-party could render the entire arbitration process unenforceable against him. Arbitration process involves convenience but cost. Therefore before initiating any proceedings, aggrieved persons must sit down and settle not only the nature of dispute and required relief but also the question whether the arbitration will work in respect of all those against whom an order or relief is proposed to be sought. On the other hand, if all necessary parties are parties to arbitration agreement, if a party fails invokes arbitration in relation to a dispute covered by arbitraiton agreement, Section 5 and Section 8 of the ACA will require any judicial authority to direct the parties to the suit or other legal proceeding to have their disputes resolved through arbitration, upon application by any party. Arbitration revolves around the agreement under which it gets initiated; between the parties to the agreement; and further that it is restricted to the subject matter covered by the arbitration agreement. Thus (1) arbitration cannot bind a non-party and (2) arbitral tribunal cannot travel beyond the scope of the agreement.