Arbitration | Substantial Financial Interest Alone Cannot Justify Impleadment Of Non-Signatory Without Contractual Participation Or Relief Sought; Himachal Pradesh High Court
Sanchayita Lahkar
The High Court of Himachal Pradesh Single Bench of Justice Ajay Mohan Goel dismissed a petition challenging an arbitral tribunal’s refusal to add a non-signatory as a respondent in ongoing arbitration between a government construction agency and its contractor over claims arising from execution of a campus construction project. The Court held that a third party’s apprehended financial exposure, even if substantial and linked to the project, does not by itself justify impleadment in arbitration when the entity was not a participant in the negotiation or performance of the underlying contract and no relief is sought against it. Finding no infirmity in the tribunal’s approach, the Court declined interference and dismissed the petition.
The writ petition was filed by the Indian Institute of Technology, Mandi, challenging an order dated 18.04.2025 passed by the Sole Arbitrator, whereby the petitioner’s application seeking impleadment as a respondent in pending arbitral proceedings was dismissed. The arbitral proceedings were initiated by a private contractor against the Central Public Works Department (CPWD) arising out of a construction contract executed between them for works relating to the IIT Mandi campus.
The petitioner relied upon a Memorandum of Understanding dated 25.08.2011 executed between IIT Mandi and CPWD, under which CPWD undertook execution and project management of construction works for the petitioner as deposit work. The petitioner contended that since the project was funded by it and any arbitral liability against CPWD would ultimately be borne by IIT Mandi, it had a substantial and direct interest in the arbitral proceedings and was therefore a necessary party.
The contractor opposed the application on the ground that the arbitration agreement was strictly between CPWD and the contractor and that the petitioner was neither a signatory nor a participant in the negotiation, performance, or execution of the contract containing the arbitration clause. The arbitrator, after considering the pleadings and applicable law, rejected the impleadment application, leading to the present writ petition under Article 226 of the Constitution.
The Court first recorded that “there are two completely distinct and independent contracts”—one between IIT Mandi and CPWD, and the other between CPWD and the contractor—“though, fact of the matter remains that the contract entered into between CPWD and the contractor is to execute the work which in terms of the Memorandum of Understanding entered into between the petitioner and CPWD was to be executed by CPWD.”
While acknowledging the legal position that a non-signatory may, in appropriate circumstances, be impleaded in arbitral proceedings, the Court noted that “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 parties in the negotiation, performance and termination of the underlying contract.”
Applying these principles, the Court observed that “there is no participation whatsoever of the present petitioner in the execution of the contract between CPWD and the Contractor.” It further recorded that the petitioner “played no role either in the course of the negotiation of the terms of the contract nor it has any role in the performance of the contract or determination of the contract.”
Addressing the petitioner’s apprehension that any arbitral award against CPWD would be passed on to it, the Court stated that “this Court fails to understand how the Award, if any, passed against CPWD by the learned Arbitrator, may be enforced and thrusted upon the petitioner by CPWD, as is being apprehended by the petitioner.” It was further observed that “this mere apprehension of the petitioner is no ground to implead it as a party in the arbitral proceedings.”
The Court also agreed with the arbitrator’s reasoning that “merely because IIT Mandi has a substantial interest in the subject matter of the contract between the Claimant and the Respondent is not a ground to implead it in a contractual dispute between the contracting parties.” It was specifically noted that the contractor had “not claimed any relief against the present petitioner.”
After examining the arbitrator’s order, the Court concluded that “one does not find any perversity therein,” and held that the arbitrator had correctly applied the principles laid down by the Supreme Court on impleadment of non-signatories.
The Court recorded that “this Court does not find any perversity in the order under challenge or any merit in the present petition. The petitioner had not pleaded any of the requirements as postulated by the Hon’ble Supreme Court under which a non-signatory can be impleaded in arbitral proceedings.”
“The present petition is dismissed. There shall be no order as to costs. Pending miscellaneous application(s), if any, also stand disposed of accordingly.”
Advocates Representing the Parties
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 CPWD);
Mr. Vikram Chaudhari, Senior Advocate, with Mr. Arvind Sharma, Advocate
Case Title: Indian Institute of Technology, Mandi v. Central Public Works Department & Another
Neutral Citation: 2025: HHC:45660
Case Number: CWP No. 9200 of 2025
Bench: Justice Ajay Mohan Goel
