In the recent case of Tomorrow Sales Agency Ltd v SBS Holdings Inc, a Division Bench of the Delhi High Court has refused to hold a third party funder liable for an adverse award. The Court has ruled that a third party funder which was not a party to an arbitration agreement, or the arbitral proceedings, or a party to the resultant arbitral award, could not be “mulcted with liability, which they have neither undertaken nor are aware of“.


The appellant, Tomorrow Sales Agency Private Limited (“TSA“) is a non-banking financial company which had funded a group of claimants – three businessmen and their company SBS Transpole Logistics Private Limited (together the “Claimants“), in bringing a SIAC arbitration against SBS Holdings Inc (“SBS“). The funding arrangement between the Claimants and TSA was made through a Bespoke Financing Agreement (“BFA“).

In the arbitration, the SIAC tribunal rendered an award in favour of SBS rejecting the Claimants’ claims and directing the Claimants to pay SBS’ costs of the arbitration (“Award“). TSA as the funder was neither a party to the arbitration agreement between the parties nor the arbitral proceedings.

When the Claimants did not satisfy the Award and make payment to SBS, SBS demanded the payment of the awarded sum from TSA. TSA refused to pay on the basis that it did not have any liability to pay the Award.

In these circumstances, SBS filed an application for interim relief under Section 9 of the Indian Arbitration and Conciliation Act 1996 (the “Act“) seeking inter alia a direction that both TSA and the Claimants disclose details of their assets and bank accounts and furnish security for the amounts awarded to SBS through the Award. A Single Judge of the Delhi High Court allowed SBS’ application and restrained the Claimants and TSA from creating any third party interest/ right/ title in respect of any unencumbered immovable assets to the extent of the sum awarded in favour of SBS under the Award.

Appeal before the Division Bench

TSA appealed the order of the Single Judge under Section 37 of the Act arguing that it was not liable to pay any amount to SBS as it was not a party to the arbitration, the arbitration agreement or the Award. Accordingly, TSA claimed that the Award could not be enforced against it.

SBS on the other hand argued that the TSA was a ‘real party’ to the arbitration as the proceedings were instituted with the support of the funds provided by TSA, TSA had substantial control of the arbitral action, and funded the proceedings for its own profit. SBS thus argued that TSA should be liable to pay the amount awarded to SBS by the Award.


The Division Bench of the Delhi High Court allowed TSA’s appeal and set aside the order of the Single Judge insofar as it related to TSA.

The Court agreed with SBS that in certain circumstances as seen through the decisions of the Indian Supreme Court, a non-signatory can be bound by an arbitration agreement. However, it held that this was not relevant to the present case as SBS was not attempting to bind TSA under an arbitration agreement, but rather to enforce an award against TSA when it had no liability under the award, not having been a party to the arbitration. In these circumstances, there was “no question of enforcing an arbitral award against a non-signatory, who is not a party to the arbitral proceedings“.

The Court clarified that a third party may be bound by an arbitral award only if it had been “compelled to arbitrate” and “was a party to the arbitration proceedings“. However, in the absence of such participation, a third party would not be bound by the resultant arbitral award.

The Court observed that no steps had been taken to join TSA as a party to the arbitration in spite of the fact that TSA’s funding of the Claimants was duly disclosed to SBS. The Court was not impressed by an argument that the SIAC Rules would not have permitted joinder of TSA as the conditions of joinder would not be met on the basis that parties, having chosen the SIAC Rules, must bear the consequences of that choice.

The Court thus held that TSA was not bound by the outcome of the arbitral proceedings and had no obligation to pay any amount due under the Award. None of the clauses of the BFA provided any obligation for TSA to fund an adverse award. TSA could not be treated as a judgment-debtor against whom the Award could be enforced.

Finally, the Court considered SBS’ argument that third party funders should be held accountable for funding impecunious claimants. SBS argued that in such cases, if claimants are unsuccessful respondents would be left without recourse being unable to recover costs from the impecunious claimants or their third party funders.

The Court rejected this argument and held that “third party funding is essential to ensure access to justice“. It held that in the absence of third party funding, a person without necessary means would be unable to pursue legitimate claims. However, the Court emphasised that it is important to ensure that third party funding is transparent and not exploitative.

The Court remarked that while certain rules are required to be formulated for transparency and disclosure in respect of third party funding in arbitration, it would be “counterproductive” to introduce an element of uncertainty by “mulcting third party funders with a liability which they have not agreed to bear“. This would be neither desirable nor permissible.


This decision provides welcome clarity for third party funders of arbitrations in India. The decision also implicitly recognizes the validity of third party funding in India – which is yet to become common place in Indian arbitrations.

More generally, this case serves as a reminder that third party funding agreements should be carefully drafted and clearly define the funder’s liability, including in the event of an adverse arbitral award.

For parties looking to hold third party funders liable for the payment or costs of an arbitration award in India, it would be useful to consider the possibility of joining funders as parties to the arbitral proceedings with a view to increase chances of successfully enforcing any adverse award.

The Court in Tomorrow Sales foreshadowed the need for arrangements and formal rules to provide clarity on third party funding structures in India. It remains to be seen whether this provides further impetus to the legislature or executive in India to formulate rules in this regard.

For more information, please contact Andrew Cannon, Partner, Anuradha Agnihotri, Of Counsel, Arushie Marwah, Associate, or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
+44 20 7466 2852
Anuradha Agnihotri
Anuradha Agnihotri
Of Counsel
Arushie Marwah
Arushie Marwah
+44 20 7466 2098