Delhi High Court
Era Infra Engineering Limited vs National Highways Authority Of India & … on 23 March, 2026
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 10.03.2026
Judgment pronounced on: 23.03.2026
+ ARB. A. (COMM.) 47/2025 & I.A. 22290/2025
ERA INFRA ENGINEERING LIMITED .....Appellant
Through: Mr. Sudhir Nandrajog, Sr. Adv.
and Mr. Kirtiman Singh, Sr.
Adv. with Mr. Kushil Anand,
Mr. Manthan Dixit, Mr.
Maullick, Ms. Ankita, Advs.
versus
NATIONAL HIGHWAYS AUTHORITY OF INDIA & ANR.
.....Respondents
Through: Mr. Santosh Kumar, Standing
Counsel with Mr. Siddharth
Mehta, Mr. Ritik Dwivedi,
Advs.
CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN
JUDGMENT
1. The appeal under Section 37 of the Arbitration and Conciliation
Act, 1996 (for short ‗the Act’) is filed against the award of the Arbitral
Tribunal (for short ‗the tribunal’) dated 30.07.2025 rejecting
application for impleadment.
Facts
2. The brief facts are that the National Highways Authority of
India (for short ‗NHAI’) issued a Notice Inviting Tender in February
2009 for four-laning of the ‗Muzaffarnagar-Haridwar section of NH-
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58′ in the states of Uttar Pradesh and Uttarakhand. The appellant,
ERA Infra Engineering Limited, a public limited company along with
Open Joint Stock Company (OJSC)-SIBMOST after entering into a
Joint Bidding Agreement dated 26.03.2009, bidded as a consortium
and was awarded the project on 29.12.2009. In terms of clauses
2.2.6(f) and 2.2.6(g) of the Request for Qualifications (‗RFQ’) and the
Letter of Acceptance (LOA), a Special Purpose Vehicle (for short
‗SPV’) – Haridwar Highway Private Limited, a limited liability
company under the Companies Act, 1956 was incorporated on
02.02.2010. The LOA required the concessionaire i.e. SPV to furnish
an unconditional bank guarantee of Rs.37.70 crores as performance
security.
2.1 A Concession Agreement (for short ‗CA’) dated 24.02.2010
was entered between NHAI and the SPV. On 14.06.2010 Engineering,
Procurement and Construction Agreement (for short ‗EPC
Agreement’) was executed between the appellant and the SPV for
execution of the project. Disputes arose between the parties, the CA
was terminated by NHAI on 19.06.2019 and the SPV invoked
arbitration.
Preliminary Objection on Maintainability
3. Learned counsel for the respondent raised a preliminary
objection that the appeal under Section 37 of the Act is not
maintainable. It is contended that rejection of an impleadment
application shall not fall within the ambit of Section 37(2)(a) of the
Act and it does not amount to acceptance of a plea under Section 16(2)
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or 16(3) of the Act.
3.1 Reliance is on the decision of this court in Hindustan Prefab
Ltd. v. M/s NCC Ltd., 2021:DHC:1802 and of the Madras High
Court in M/s. Marg Ltd. v. M/s. PGA Trading & Services & Ors.,
ARB. Appeal No. 11/25, to contend that the appeal is not maintainable
against the impugned order. The decision in National Thermal
Power Corp. Ltd. v. Siemens Atkeingesellschaft, (2007) 4 SCC 451
is relied upon to buttress the contention that an appeal is not
maintainable if the order passed does not fall under Sections 16(2) or
16(3) of the Act. The submission is that Section 5 of the Act stipulates
minimum judicial intervention in arbitral proceedings and that an
appeal under Section 37 is maintainable only against the orders
mentioned therein.
3.2 The argument is that Sections 16(2) and 16(3) of the Act will
come into play only if the plea that the tribunal lacks jurisdiction or is
exceeding the jurisdiction is accepted whereas in the present case the
application for impleadment was rejected and there was no acceptance
of a plea. It is contended that the issue of jurisdiction was not decided
by the tribunal but the application was rejected on merits and the
tribunal has not held that it lacked jurisdiction.
4. Per contra the project was awarded to the consortium and at
that time the SPV was not in existence. The obligation to execute the
project and to comply with the terms of the tender is that of the
consortium and the SPV was incorporated to give effect to the
awarded project. The submission is that the consortium is a necessary
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party in the arbitral proceedings.
4.1 Decisions of the Supreme Court in Adavya Projects Private
Limited v. Vishal Structurals Private Limited & Ors., 2025 SCC
OnLine SC 806 and ASF Buildtech (P) Ltd. v. Shapoorji Pallonji &
Co. (P) Ltd., (2025) 9 SCC 76, are relied upon to fortify the
submission that rejection of an impleadment application is a decision
under Section 16 on the jurisdiction of the tribunal and the order is
appealable under Section 37 of the Act.
5. In rebuttal the learned counsel for the respondent contended that
the decisions of the Supreme Court relied upon by the appellant were
not dealing with the issue of maintainability of an appeal under
Section 37 of the Act.
6. The question is whether the order of the tribunal rejecting the
application for impleadment is appealable under Section 37 of the
Act?
7. There were contradictory views of various High Courts on the
question as to whether impleadment of a non-signatory was to be
decided by the referral court while deciding a petition under Section
11 of the Act. The Supreme Court in ASF Buildtech (P) Ltd. (supra)
decided the issue of ―whether the tribunal has the power to
implead/join non-signatories to the arbitration agreement‖. It was held
that the tribunal is empowered to examine whether a non-signatory is
bound by the arbitration agreement and can implead such a necessary
party. The jurisdiction of the tribunal is not affected by non-raising of
the issue of impleadment before the referral court. It was considered
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that in case the referral court refuses impleadment of a non-signatory,
the party would be rendered without a statutory remedy and on the
other hand against a determination of the issue of jurisdiction and
impleadment by the tribunal, the order would be amenable to
challenge under the Act. It would be fruitful to reproduce the
following paragraphs of the judgement:
―103. Thus, even in the absence of the non-signatory being
made a party to the proceedings before the Referral Court,
and where the question of its impleadment has neither been
raised nor addressed or left open to the Arbitral Tribunal
by the Referral Court, the Arbitral Tribunal would be full
empowered to examine this issue in the first instance and
determine whether any non-signatory is bound by the
arbitration agreement based on the factual circumstances
of the case, and if necessary, implead such non-signatory
to the arbitration proceedings.
108. Put differently, although notionally the exercise of
determining ―existence of the arbitration agreement qua
the non-signatory’, may, on the surface appear to be
concerned with the arbitration agreement or clause in
question, yet one must be mindful that the actual focus of
such exercise lies in determining the existence of consent
of the parties through fact patterns to such arbitration
agreement or clause and not vice-versa. It is the existence
of mutual consent to arbitrate–not the formal existence of
the arbitration agreement–that is the heart of this inquiry.
110. Even if it is assumed for a moment that the Referral
Court in its jurisdiction under Section 11 of the 1996 Act
has the discretion to determine whether a non-signatory is
a veritable party to the arbitration agreement or not, by
virtue of Cox and Kings (1), the Referral Court should only
refrain but rather loathe the exercise of such discretion.
Any discretion which is conferred upon any authority, be it
Referral Courts must be exercised reasonably and in a fair
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manner. Fairness in this context does not just extend to a
non-signatory’s rights and its apprehension of prejudice,
fairness also demands that the arbitration proceedings is
given due time to gestate so that the entire dispute is
holistically decided. Any determination even if prima-facie
by a Referral Court on such aspects would entail an
inherent risk of frustrating the very purpose of resolution
of dispute, if the Referral Courts opine that a non-
signatory in question is not a veritable party. On the other
hand, the apprehensions of prejudice can be properly
mitigated by leaving such question for the Arbitral
Tribunal to decide, as such party can always take recourse
to Section 16 of the 1996 Act and thereafter in appeal
under Section 37, and where it is found that such party was
put through the rigmarole of arbitration proceedings
vexatiously, both the Tribunal and the courts, as the case
may be, should not only require that all costs of arbitration
insofar as such non-signatory is concerned be borne by the
party who vexatiously impleaded it, but the Arbitral
Tribunal would be well within its powers to also impose
costs.
116. Similarly, in Ajay Madhusudan (supra) it was held
that since a detailed examination of numerous disputed
questions of fact was required for determining whether the
non-signatory is a veritable party to the arbitration
agreement, the same cannot be examined in the limited
jurisdiction under Section 11 of the 1996 Act as it would
tantamount to a mini trial. Accordingly, the Arbitral
Tribunal was found to be the appropriate forum for
deciding the said issue on the basis of the evidence that
may be adduced by the parties.‖
8. Before proceeding further, it would be relevant to quote Section
16 and 37 of the Act:
―16. Competence of arbitral tribunal to rule on its
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own jurisdiction, including ruling on any objections with
respect to the existence or validity of the arbitration
agreement, and for that purpose,–
(a) an arbitration clause which forms part of a contract
shall be treated as an agreement independent of the other
terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is
null and void shall not entail ipso jure the invalidity of the
arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission
of the statement of defence; however, a party shall not be
precluded from raising such a plea merely because that he
has appointed, or participated in the appointment of, an
arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope
of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised
during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases
referred to in sub-section (2) or sub-section (3), admit a
later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to
in sub-section (2) or sub-section (3) and, where the
arbitral tribunal takes a decision rejecting the plea,
continue with the arbitral proceedings and make an
arbitral award.
(6) A party aggrieved by such an arbitral award may
make an application for setting aside such an arbitral
award in accordance with section 34.‖
―37. Appealable orders.–(1) 2 [Notwithstanding
anything contained in any other law for the time being in
force, an appeal] shall lie from the following orders (and
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order, namely:–
(a) refusing to refer the parties to arbitration under section
8;
(b) granting or refusing to grant any measure under
section 9;
(c) setting aside or refusing to set aside an arbitral award
under section 34.
(2) Appeal shall also lie to a court from an order of the
arbitral tribunal–
(a) accepting the plea referred to in sub-section (2) or
sub-section (3) of section 16; or
(b) granting or refusing to grant an interim measure under
section 17.
(3) No second appeal shall lie from an order passed in
appeal under this section, but nothing in this section shall
affect or takeaway any right to appeal to the Supreme
Court.‖
9. Under Section 37(1) of the Act, an appeal against the court
orders mentioned therein shall lie to the court authorised to hear
appeals against the original decrees of such court. Under Section
37(2)(a), an appeal shall lie against an order of the tribunal accepting a
plea referred to in sub-sections (2) or (3) of Section 16. The Section
bars an appeal against any other order apart from those specifically
mentioned.
10. Section 16 empowers the tribunal to rule its own jurisdiction.
Under sub-section (2) a plea that the tribunal does not have
jurisdiction shall be raised not later than the submission of the
statement of defence. A party having appointed or participated in the
appointment of an arbitrator shall not be precluded from raising such a
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plea. As soon as the scope is violated during the proceedings, a plea
that the tribunal is exceeding the scope can be raised under sub-section
(3). Section 16(4) dilutes the rigours of Sections 16(2) and 16(3) of
the stage to raise the plea and empowers the tribunal to admit a plea
under sub-sections (2) or (3) at a later stage, upon being satisfied of
justification for the delay.
11. For impleadment the appellant filed an application under
Section 16 of the Act, pleading to be a necessary party to the arbitral
proceedings and to be bound by the CA despite not being a signatory
thereto. The application was rejected by the tribunal holding that the
CA was between the SPV and the respondent and the tribunal being a
creature of the contract should not ordinarily implead a non-signatory
as a party. In other words, the tribunal held that it does not have
jurisdiction qua the issues sought to be raised by the appellant (a non-
signatory to the CA) and it would be exceeding its scope of authority
by impleading the appellant as a party.
12. Jurisdiction is the authority of the court to adjudicate a cause of
action and grant the relief sought. Refusal to go into the merits of a
claim can fall within the exercise of jurisdiction. The relevant portion
of the decision of Supreme Court in RE-Interplay between
Arbitration Agreements under the Arbitration and Conciliation
Act, 1996 and the Indian Stamp Act, 1899, 2023 INSC 1066 is
quoted below:
―125….Jurisdiction is generally defined as the power of a
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cause. Jurisdiction refers to the authority of a court or tribunal
to decide matters that are litigated before it or to take
cognizance of matters presented before it in a formal way for
its decision. In Official Trustee, West Bengal v. Sachindra
Nath Chatterjee, this Court held that for a court to have
jurisdiction to decide a particular matter, it must not only have
jurisdiction to try the suit brought but must also have the
authority to pass the orders sought. In NTPC v. Siemens
Atkeingesllchaft, this Court observed that any refusal to go
into the merits of a claim may be in the realm of jurisdiction.
Accordingly, it was observed that the issue of limitation goes
to jurisdiction because if a claim is barred by limitation, a
tribunal can refuse to exercise its jurisdiction.‖
13. The Constitution Bench decision of the Supreme Court in Cox
& Kings Ltd. v. SAP India (p) Ltd. & Anr., (2024) 4 SCC 1 held
that the determination of the parties to the agreement is an issue
touching upon the competence of the tribunal. The relevant portion is
quoted below:
―163. Section 16 of the Arbitration Act enshrines the
principle of competence-competence in Indian arbitration
law. The provision empowers the Arbitral Tribunal to rule
on its own jurisdiction, including any ruling on any
objections with respect to the existence or validity of
arbitration agreement. Section 16 is an inclusive provision
which comprehends all preliminary issues touching upon
the jurisdiction of the Arbitral Tribunal. The doctrine of
competence-competence is intended to minimise judicial
intervention at the threshold stage. The issue of determining
parties to an arbitration agreement goes to the very root of
the jurisdictional competence of the Arbitral Tribunal.‖
(emphasis supplied)
14. The Supreme Court in Ajay Madhusudan Patel & Ors. v.
Jyotrindra S. Patel & Ors., (2025) 2 SCC 147 while summarising
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the legal position on the issue of the ―scope of jurisdiction of the
referral court under Section 11(6) of the 1996 Act‖ and considering
the decision in Cox & Kings Ltd. (supra) held that the issue of
determining the parties to the arbitration agreement can be decided
under Section 16 of the Act. The relevant portion is quoted below:
―76.7. Cox & Kings2 specifically dealt with the scope of
inquiry under Section 11 when it comes to impleading the
non-signatories in the arbitration proceedings. While saying
that the referral court would be required to prima facie rule
on the existence of the arbitration agreement and whether
the non-signatory party is a veritable party to the arbitration
agreement, it also said that in view of the complexity in
such a determination, the Arbitral Tribunal would be the
proper forum. It was further stated that the issue of
determining parties to an arbitration agreement goes to the
very root of the jurisdictional competence of the Arbitral
Tribunal and can be decided under its jurisdiction under
Section 16.‖
(emphasis supplied)
15. The Supreme Court in ASF Builtech (P) Ltd. (supra) albeit,
dealt with the issue that impleadment of a non-signatory is to be
decided by the tribunal but while holding so, took into consideration
that in the eventuality of this issue being decided by the referral court
the party would have no statutory remedy against an order rejecting
the prayer. On the contrary the determination made by the tribunal on
the issue of impleadment and jurisdiction would be amenable to
challenge under Section 16 and 37 of the Act.
16. The court on an application for impleadment passes a
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procedural order but the tribunal in arbitration determines whether it
has jurisdiction vis-a-vis the rights and liabilities of a non-signatory to
the agreement. While deciding the impleadment of a non-signatory the
tribunal deals with the issue of jurisdiction and this falls within the
ambit of Section 16(2) and 16(3) of the Act.
17. The contention of the respondent that a decision of the tribunal
rejecting the application for impleadment does not tantamount to
accepting a plea of the tribunal not having jurisdiction and is not
appealable under Section 37 of the Act, lacks merit. The word used in
Section 16 of the Act is ‗plea’ and not ‗application’. There is no
restriction in Section 16 that a plea of lack of jurisdiction or exceeding
jurisdiction can be raised only by a particular party. To put it
differently for rejecting the application for impleadment, the plea of
the respondent that the appellant was not bound by CA being a non-
signatory and that the tribunal had no jurisdiction to deal with the
issues sought to be raised by the appellant was accepted.
18. The submission of the learned counsel for the respondent that
the question of jurisdiction was not decided by the tribunal and the
word ‗jurisdiction’ is not used in the award, is noted to be rejected.
The nature of the issue decided by the tribunal is relevant and not the
language used in the award. Moreover from paragraphs 28 and 29 of
the award it is evident that the tribunal held that being a creature of the
contract it should not ordinarily implead a non-signatory to the CA as
a party. The tribunal decided that it had no jurisdiction qua the non-
signatory to the CA.
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19. The Supreme Court in ASF Buildtech (P) Ltd. (supra) while
holding that the issue of impleadment should be left to be decided by
the tribunal, considered that a statutory remedy would be available
against the decision of the tribunal. In case the preliminary objection
of the respondent that an appeal under Section 37 of the Act is not
maintainable is accepted, the only remedy if available to the petitioner
would be under Section 34 of the Act i.e. after passing of the arbitral
award. Prejudice would be caused to the petitioner for having to
challenge the award within the limited scope under Section 34 of the
Act and that too without participating in the arbitral proceedings.
Moreover, in case if under section 34 it is concluded that the petitioner
inspite of being a non-signatory to the agreement is a necessary party
the entire proceedings shall come to naught for non-impleadment of a
necessary party in arbitral proceedings. The parties would then have to
undergo another round, resulting in delay which would be contrary to
the basic objective of speedy and efficient dispute resolution through
arbitration.
20. The rejection of the application for impleadment brings a dead
end to the proceedings so far as the non-signatory seeking
impleadment is concerned. The wait for seeking remedy till passing of
the award and thereafter in case of success, the entire arbitration
exercise to be undertaken de novo would defeat the object of the
enactment of the Act especially when a right to appeal is provided on
a conjoint reading of Sections 16 and 37 of the Act. For this reason
the statutory remedy mentioned in ASF Buildtech (P) Ltd. (supra) is
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not a remedy under Section 34 of the Act which would be against the
spirit of the Act of time bound conclusion of dispute resolution by
arbitration.
21. The reliance placed on the decision of Hindustan Prefab Ltd.
(supra) by the respondent is of no help. In that case the court had
expressed serious reservations on the maintainability of an appeal
under Section 37 of the Act against rejection of an application for
impleadment but had not decided this issue and proceeded to deal with
the matter on merits.
22. The Madras High Court in M/s. Marg Ltd. (supra) was dealing
with the issue as to whether impleadment of a party would fall under
Section 17 of the Act and this is not the issue in the present case.
23. In all fairness, it should be noted that the consistent view of this
Court in Rhiti Sports Management Pvt. Ltd. v. Power Play Sports
& Events Ltd., 2018:DHC:2808, National Highway Authority of
India v. Lucknow Sitapur Expressway Ltd., 2022:DHC:5696,
Goyal MG Gases Pvt. Ltd. v. Panama Infrastructure Developers
Pvt. Ltd., 2023 SCC OnLine Del 1894, National Highway
Authoirty of India v. IRB Ahmedabad Vadodra Super Express
Tollways Pvt. Ltd., 2024:DHC:2665 and Coslight Infra Company
Pvt. Ltd. v. Concept Engineers, 2024:DHC:8755, has been that
rejection of an impleadment application does not constitute an ‗award’
amenable to challenge under Section 34 of the Act and that rejection
of the prayer for impleadment is not an interim award under Section
31(6) of the Act. These authorities do not deal with the issue as to
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whether rejection of a prayer for impleadment would fall under
Sections 16(2) and 16(3) of the Act. Moreover, these cases were
decided prior to the decision of the Supreme Court in ASF Buildtech
(P) Ltd. (supra) wherein the contrary views of the High Courts
holding that the issue of impleadment is not to be decided by the
tribunal were over-ruled, considering that the party aggrieved of
rejection of impleadment will not have a statutory remedy available
against such rejection.
24. The preliminary objection of maintainability of appeal is
rejected. The rejection of the application for impleadment of a non-
signatory to the CA falls within the ambit of Sections 16(2) & (3) and
is appealable under Section 37 of the Act.
Contention on Impleadment on behalf of the Appellant
25. It is argued that the expression ‗party’ under Section 7 of the
Act includes non-signatories in appropriate cases. Reliance is placed
on the decision of the Supreme Court in Cox and Kings Ltd. (supra).
The contention is that on a conjoint reading of the clauses of the CA
and the EPC Agreement, there is a relationship between NHAI and the
consortium.
Arguments of the Respondent
26. It is argued that the CA was entered into between the SPV and
NHAI, the appellant was not a signatory to the CA and is not a
necessary party to the proceedings. The definition of ‗parties’ in
Article 48.1 of the CA is relied upon. The submission is that the
parties to the agreement are defined as parties collectively and
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individually but the appellant is not a party to the agreement. The
contention is that had it been the intent of NHAI to enter into a
contract with the appellant, the CA would have been executed with the
appellant and not with the SPV. Clause 47.13 of the CA is pressed
into service to submit that the CA was solely for the benefit of the
parties thereto and their successors but created no duty, standard of
care or liability in favour of any person not a party to the CA. It is
emphasised that clause 1.4.2 of the CA provides that a specific clause
is to prevail over a general clause and therefore clause 47.13 of the
CA shall prevail over clause 7.1 of the CA. The judgement of the
Supreme Court in Cox and Kings Ltd. (supra) is relied upon to argue
that only in the rarest of cases a non-signatory is to be impleaded as a
party. Contention is that there is no pleading to make out a rare case.
The last submission is that the scope of interference under Section 37
of the Act is limited and the view taken by the tribunal is a plausible
one.
27. From the clauses of the RFQ, the CA and the EPC Agreement it
emerges:
(i) Clause 2.2.6 (f) of the RFQ stipulates that the parties to a
consortium shall form an SPV to execute the project if the bid is
awarded to the consortium.
(ii) Article 48.1 of the CA defines the term ‗Parties’ to mean the
parties to the CA collectively and individually.
(iii) The expression ‗Project Agreements’ includes the CA, the
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Tolling Contract, and any other agreements entered into by the SPV in
relation to the project but it excludes the Escrow Agreement, the
Substitution Agreement and agreements for procurement of goods or
services involving consideration upto five crore.
(iv) The ‗EPC Agreement’ is defined as the engineering,
procurement and construction contract(s) entered into by the SPV with
one or more contractors for carrying out the project works in
accordance with the provisions of the CA.
(v) Clause 1.4.2(a) of the CA provides that in case of any
inconsistency between two or more clauses of the CA, the provision of
a specific clause relevant to the issue under consideration shall prevail
over a general clause.
(vi) Under clause 5.3.1 of the CA, the SPV could not undertake
change in ownership without prior approval of NHAI. Clause 5.3.2
defines ‗change in ownership’ and provides that approval for such
change would be considered from the perspective of national security
and public interest.
(vii) Clause 5.6 of the CA stipulates that the SPV shall not without
prior written consent of NHAI directly or indirectly engage in, be
concerned with or be interested in any other business other than the
project awarded.
(viii) Clause 7.1 (k) of the CA requires that the SPV shall at no time
effect any change in ownership except in accordance with the CA and
the provisions of clause 5.3 thereof. It mandates that the consortium
members, together with their associates shall hold not less than fifty-
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one percent of the issued and paid-up equity as on the date of the CA.
Each evaluated consortium member shall hold not less than twenty-six
percent of such equity during the construction period and for two
years thereafter.
(ix) Clause 7.1(l) of the CA provides that the members of the
consortium and their associates shall have the financial standing and
resources to fund the equity and to raise debt necessary for
implementation of the project.
(x) Clause 7.1 (m) of the CA states that each consortium member
has requested NHAI to enter into the CA with the SPV pursuant to the
Letter of Award and has agreed to and unconditionally accepted the
terms and conditions set forth therein.
(xi) Clause 47.13 of the CA clarifies that the CA does not create any
duty, standard of care or liability in favour of any person not a party to
the CA and is intended solely for the benefit of the parties, their
successors and permitted assigns.
(xii) Clause 44.6 of the EPC Agreement deals with the consequences
of termination of the CA. Under clause 44.6.1, if NHAI does not step
into the shoes of the SPV in terms of the substitution agreement, the
EPC Agreement shall automatically be terminated from the date of
termination of the CA.
(xiii) Under clause 44.6.2 of the EPC Agreement, upon termination of
the CA the EPC contractor (appellant) shall not be entitled to any
further payment and the SPV shall be entitled to invoke the
performance guarantee in respect of losses and claims arising from
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such termination.
28. The law is settled that a non-signatory to the contract can be
impleaded as a party in arbitral proceedings. It would be relevant to
quote the following decisions of the Supreme Court:
28.1 In ASF Buildtech (P) Ltd. (supra) it was held:
―(i) Whether the Arbitral Tribunal has the power to
implead/join non-signatories to the arbitration agreement?
14. One of the principal contentions raised by the
appellants herein for the purpose of assailing the impugned
judgment is that the petitioner Company being a non-
signatory to the arbitration Agreement was never made a
party to the proceedings before the Referral Court under
Section 11 of the 1996 Act by virtue of which the Arbitral
Tribunal came to be constituted. No notice of invocation
was issued either to the appellant Company herein. In such
circumstances, it was submitted that the appellant
Company; a non-signatory to the arbitration agreement
could not have been joined as a party after the referral
stage i.e. after the constitution of the Arbitral Tribunal
solely on the basis of the averments made in the
counterclaim/statement of claim of Respondent 1 herein. In
other words, it was contended that after the culmination of
the referral stage in terms of Section 11 of the 1996 Act,
the Arbitral Tribunal has no power whatsoever to implead
or join a non-signatory to the arbitration agreement and
that such power vests only with the Referral Court that too
prior to the Arbitral Tribunal coming into existence.
102. What follows from this is that, the question whether a
non-signatory is bound by the arbitration agreement is
completely independent of the question concerning the
―existence‖ of an arbitration agreement. The two
inquiries–while related–are distinct in nature and
function. The ―existence‖ of an arbitration agreement
pertains solely to its formal presence in the contractual
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documentation, as per the requirements under the 1996 Act
and once established, it obligates the referral of the dispute
to arbitration. By contrast, the question of whether a non-
signatory is bound by the arbitration agreement involves a
more nuanced determination of the parties’ intentions,
contractual relationships, and the broader context of the
agreement, which is not confined to the formal text of the
arbitration clause alone.
103. Thus, even in the absence of the non-signatory being
made a party to the proceedings before the Referral Court,
and where the question of its impleadment has neither been
raised nor addressed or left open to the Arbitral Tribunal
by the Referral Court, the Arbitral Tribunal would be fully
empowered to examine this issue in the first instance and
determine whether any non-signatory is bound by the
arbitration agreement based on the factual circumstances
of the case, and if necessary, implead such non-signatory
to the arbitration proceedings.
109. There runs no umbilical cord between the exercise of
determining the ―existence of the arbitration agreement‖
and determining its ―existence qua the non-signatory‖. The
latter is an independent and substantive determination that
falls outside the narrow and circumscribed domain of the
Referral Court’s singular obligation under Section 11 sub-
section (6A) of the 1996 Act and as such cannot be
conflated to be one pertaining to or attacking the
―existence‖ of an arbitration.
129. It is well within the jurisdiction of the Arbitral
Tribunal to decide the issue of joinder and non-joinder of
parties and to assess the applicability of the Group of
Companies Doctrine. Neither in Cox & Kings (1) (supra)
nor in Ajay Madhusudan (supra), this Court has said that it
is only the Reference Courts that are empowered to
determine whether a non-signatory should be referred to
arbitration. The law which has developed over a period of
time is that both ―courts and tribunals‖ are fully
empowered to decide the issues of impleadment of a non-
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signatory and the Arbitral Tribunals have been held to be
preferred forum for the adjudication of the same.‖
28.2 In Adavya Projects (P) Ltd. (supra) it was held:
―24. As briefly stated above, the determination of who
is a party to the arbitration agreement falls within the
domain of the arbitral tribunal as per Section 16 ACA.
Section 16 embodies the doctrine of kompetenz-
kompetenz i.e., that the Arbitral Tribunal can determine
its own jurisdiction. The provision is inclusive and
covers all jurisdictional questions, including the
existence and validity of the arbitration agreement,
who is a party to the arbitration agreement, and the
scope of disputes referrable to arbitration under the
agreement. Considering that the Arbitral Tribunal’s
power to make an award that binds the parties is
derived from the arbitration agreement, these
jurisdictional issues must necessarily be decided
through an interpretation of the arbitration agreement
itself. Therefore, the arbitral tribunal’s jurisdiction must
be determined against the touchstone of the arbitration
agreement.‖28.3 In ONGC Ltd. v. Discovery Enterprises (P) Ltd., (2022) 8
SCC 42 it was held:
―40. In deciding whether a company within a group of
companies which is not a signatory to arbitration
agreement would nonetheless be bound by it, the law
considers the following factors:
(i) The mutual intent of the parties;
(ii) The relationship of a non-signatory to a party which is
a signatory to the agreement;
(iii) The commonality of the subject-matter;
(iv) The composite nature of the transactions; and
(v) The performance of the contract.‖
28.4 In Cox & Kings Ltd. (supra) it was held:
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―123. The participation of the non-signatory in the
performance of the underlying contract is the most
important factor to be considered by the Courts and
tribunals. The conduct of the non-signatory parties is an
indicator of the intention of the non-signatory to be bound
by the arbitration agreement. The intention of the parties
to be bound by an arbitration agreement can be gauged
from the circumstances that surround the participation of
the non-signatory party in the negotiation, performance,
and termination of the underlying contract containing
such agreement. The UNIDROIT Principle of International
Commercial Contract, 2016 [UNIDROIT Principles of
International Commercial Contracts, 2016, Article 4.3.]
provides that the subjective intention of the parties could
be ascertained by having regard to the following
circumstances:
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between
themselves;
(c) the conduct of the parties subsequent to the conclusion
of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and
expressions in the trade concerned; and
(f) usages.
124. In Dow Chemical2, consent of the non-signatory
parties to arbitrate was implied primarily in view of their
predominant participation in the conclusion, performance,
and termination of contracts. Similarly, this Court
in Canara Bank [MTNL v. Canara Bank, (2020) 12 SCC
767] observed that a non-signatory entity may be bound
by an arbitration agreement where a parent or a member
of the group of companies is a signatory to the arbitration
agreement and the non-signatory entity of the group has
been engaged in the negotiation or performance of the
commercial contract.
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126. Evaluating the involvement of the non-signatory
party in the negotiation, performance, or termination of a
contract is an important factor for a number of reasons.
First, by being actively involved in the performance of a
contract, a non-signatory may create an appearance that it
is a veritable party to the contract containing the
arbitration agreement; second, the conduct of the non-
signatory may be in harmony with the conduct of the
other members of the group, leading the other party to
legitimately believe that the non-signatory was a veritable
party to the contract; and third, the other party has
legitimate reasons to rely on the appearance created by
the non-signatory party so as to bind it to the arbitration
agreement.
132. We are of the opinion that there is a need to seek a
balance between the consensual nature of arbitration and
the modern commercial reality where a non-signatory
becomes implicated in a commercial transaction in a
number of different ways. Such a balance can be
adequately achieved if the factors laid down
under Discovery Enterprises [ONGC Ltd. v. Discovery
Enterprises (P) Ltd., (2022) 8 SCC 42 : (2022) 4 SCC
(Civ) 80] are applied holistically. For instance, the
involvement of the non-signatory in the performance of
the underlying contract in a manner that suggests that it
intended to be bound by the contract containing the
arbitration agreement is an important aspect. Other
factors such as the composite nature of transaction and
commonality of subject-matter would suggest that the
claims against the non-signatory were strongly interlinked
with the subject-matter of the tribunal’s jurisdiction.
Looking at the factors holistically, it could be inferred
that the non-signatories, by virtue of their relationship
with the signatory parties and active involvement in the
performance of commercial obligations which are
intricately linked to the subject-matter, are not actually
strangers to the dispute between the signatory parties.
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169. In case of joinder of non-signatory parties to an
arbitration agreement, the following two scenarios will
prominently emerge : first, where a signatory party to an
arbitration agreement seeks joinder of a non-signatory
party to the arbitration agreement; and second, where a
non-signatory party itself seeks invocation of an
arbitration agreement. In both the scenarios, the referral
court will be required to prima facie rule on the existence
of the arbitration agreement and whether the non-
signatory is a veritable party to the arbitration agreement.
In view of the complexity of such a determination, the
referral court should leave it for the Arbitral Tribunal to
decide whether the non-signatory party is indeed a party
to the arbitration agreement on the basis of the factual
evidence and application of legal doctrine. The Tribunal
can delve into the factual, circumstantial, and legal
aspects of the matter to decide whether its jurisdiction
extends to the non-signatory party. In the process, the
Tribunal should comply with the requirements of
principles of natural justice such as giving opportunity to
the non-signatory to raise objections with regard to the
jurisdiction of the Arbitral Tribunal. This interpretation
also gives true effect to the doctrine of competence-
competence by leaving the issue of determination of true
parties to an arbitration agreement to be decided by the
Arbitral Tribunal under Section 16.‖
(emphasis supplied)
29. The bidding was undertaken by the consortium and the
appellant is one of its members. The SPV was incorporated pursuant
to the LOA. The EPC Agreement was executed by the SPV with the
appellant. The appellant continued to remain involved in the project.
The performance bank guarantees and corporate guarantees were
furnished by the SPV utilising the credit limit of the appellant. The
project was financially backed by the consortium. Under clause 7.1(k)
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of the CA, the consortium members along with their associates had to
hold not less than fifty-one percent of the issued and paid-up equity of
the SPV as on the date of the CA. Clause 7.1(m) provides that each
member of the consortium had requested NHAI to enter into the CA
with the SPV pursuant to Letter of Award and had unconditionally
accepted the terms and conditions set forth therein. There is a clear
understanding between consortium and NHAI that the members of the
consortium had accepted the terms and conditions of the CA.
30. The principles laid down by the Supreme Court in ONGC Ltd.
(supra) are fulfilled in the present case. There is mutual intent between
the parties to bind the members of the consortium in relation to the
project. The relationship between the appellant and the SPV is evident
from the financial structuring of the project. The performance of the
contract affects not only the SPV but also the appellant. The
consequences of non-performance have an impact on the appellant
also.
31. The definition of ‗parties’ and clause 47.13 of the CA as relied
upon by the respondent cannot be read in isolation ignoring clause 7.1
of the CA. The interplay between these clauses shall be considered by
the tribunal at an appropriate stage. Whether clause 7.1 or clause
47.13 of the CA is the specific clause governing the issue and the
effect of clause 1.4.2 of the CA are matters to be determined by the
tribunal.
32. The submission of learned counsel for the respondent that had
there been an intention to include the appellant the CA would have
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been executed directly between NHAI and the appellant and not
through the SPV, does not enhance the case of the respondent. While
deciding the application for impleadment the intention of the parties is
to be gathered from the clauses of the contract and from nothing
beyond it.
33. There cannot be a blanket proposition that a non-signatory to an
agreement cannot be impleaded as a party in arbitral proceedings. The
tribunal is vested with the jurisdiction to implead a non-signatory
connected with or bound by the agreement. The intricate connection
between NHAI, the SPV, the consortium and its member including the
appellant is prima facie established. Consequently the appellant is a
proper and necessary party and is ordered to be impleaded.
34. The appeal is allowed. Pending application is also disposed of.
35. It is clarified that the observations made hereinabove are only
for the purpose of deciding the challenge to the dismissal of the prayer
of impleadment and shall not be construed as an opinion on the merits
of the disputes. The tribunal shall decide the issues independently and
without being influenced by the observations made by this court.
AVNEESH JHINGAN, J.
MARCH 23, 2026/Pa
Reportable: Yes
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