Mere Interest In Project Does Not Justify Impleadment Of Non-Signatory In Arbitration Without Contractual Participation: HP High Court
The Himachal Pradesh High Court dismissed a writ petition holding that mere financial or consequential interest was insufficient to implead a non-signatory in the arbitration proceedings unless the stringent tests as laid down by the Supreme Court which include participation in the negotiation, performance or termination of contract were satisfied. Justice Ajay Mohan Goel...
The Himachal Pradesh High Court dismissed a writ petition holding that mere financial or consequential interest was insufficient to implead a non-signatory in the arbitration proceedings unless the stringent tests as laid down by the Supreme Court which include participation in the negotiation, performance or termination of contract were satisfied.
Justice Ajay Mohan Goel observed: “Merely because the petitioner had a substantial interest in the subject matter of the contract, the same was not a ground to implead it as a party in the arbitration proceedings going on between the parties before the learned Arbitrator. This Court holds that the petitioner had no direct or indirect role to play in the execution of the contract between CPWD and the Contractor.”
Background:
IIT Mandi entered into a Memorandum of Understanding (MoU) with CPWD in 2011 for construction of academic and residential infrastructure at its Kamand campus. CPWD in turn awarded the construction work to a private contractor under a separate contract containing an arbitration clause. Later disputes arose between CPWD and the contractor, leading to arbitration proceedings.
During the pendency of arbitration, IIT Mandi sought its impleadment in the arbitration contending that it had substantive financial and administrative interest in the project, that any outcome against the CPWD would ultimately burden IIT Mandi and that principles governing impleadment of a non-signatory in the arbitration were satisfied in the present case.
The arbitral tribunal dismissed the application, holding that IIT Mandi was neither a signatory nor a participant in the contract between the CPWD and the contractor. Aggrieved, IIT Mandi had approached the High Court by filing the present writ petition.
IIT Mandi argued that it was ultimately beneficiary of the project and bore financial liability and that denying impleadment in the arbitration would prejudice it and violate principles of natural justice.
Findings:
The Court while rejecting the appellant's contentions and upholding the arbitral tribunal's order noted that the MOU between IIT Mandi and CPWD and the construction contract between the CPWD and the contractor were two independent and distinct agreements.
Quoting the Supreme Court in Cox & Kings where the test to include a non-signatory in the arbitral proceedings was laid down, observed:
“The intention of the parties can be ascertained from circumstances like (a) preliminary negotiation 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.”
Applying the above principles to the facts of the present case, the court noted that IIT mandi was neither a signatory to the contract nor did it participate in negotiation, performance and termination of the contract containing the arbitration clause. Accordingly, it dismissed the contention and held that the apprehension that CPWD may later recover amounts from IIT mandi does not create privity of arbitrability.
“There is no participation whatsoever of the present petitioner in the execution of the contract between CPWD and the Contractor. In other words, said contract was entered into between CPWD and the Contractor independent of the petitioner and the petitioner was neither consulted nor was it in any manner whatsoever associated with the execution of the contract.”, it observed.
In light of the above discussion, it held that just because the appellant has substantial interest in the project, it cannot be a ground to implead it in the arbitral proceedings governed by a separate agreement.
Accordingly, the court dismissed the present petition holding that the appellant failed to show that it directly or indirectly participated in the initial negotiation, performance or termination of the contract executed between the CPWD and the contractor.
Case Title: Indian Institute of Technology, Mandi (Kamand), H.P. Versus Central Public Works Department & another
Case Number: CWP No.9200 of 2025
Judgment Date: 29/12/2025
For the petitioner : M/s Akhil Mittal, Abhinav Purohit and Abhishek Kaundal, Advocates. _
For the respondents :Mr. Balram Sharma, Deputy Solicitor General of India, for respondent No.1. Mr. Vikram Chaudhari, Senior Advocate (through V.C.), with Mr.Arvind Sharma, Advocate, for respondent No.2. Dr. Sambhav K. Pandey, Registrar, IIT Mandi, present in the Court in person.