Arbitration – Interim Award / Order to implead non-signatory respondents to arbitral proceedings – MOU permitted non-signatory to invest in the projects and perform contract.

Respondent Nos.1 and 2 are the claimants and the Respondent No.3 is the original respondent in MOU dated 10.2.2012 and in the arbitral proceedings

The issues were framed. Thereafter, the application under Order 1 Rule 10 of CPC was filed to implead the petitioners as party respondents to the arbitration proceedings.

By the interim Award dated 2.1.2024 of the learned Sole Arbitrator, the application of the respondent nos.1 and 2 to implead the petitioners as party respondents to the arbitration proceedings despite not being signatories to the arbitration agreement.

HELD that the MOU permitted Respondent no.3 (non-signatory to the MOU) to invest in the projects either directly or through its subsidiaries.  The respondent no.3 invested in the properties / projects through the petitioners and the petitioners went on to perform the contract by executing sale-deeds.  However, at the time of appointment of arbitration in section 11 petition, the plea for impleadment of non-signatory respondents was not raised.  It is only after framing of the issues by the Arbitrator that the application for impleadment was made.  The Arbitrator has powers to consider and decide the application for impleadment of non-signatory.   Section 16 vests powers in the Arbitrator to determine the issue of jurisdiction and same would include the issue whether the Arbitrator has jurisdiction over non-signatories to an arbitration agreement.  

The question was whether the sole Arbitrator could have on his own accord allowed the impleadment of the petitioners – non-signatories to the  arbitration agreement, without conferment of such powers by the Referral Court at the time of reference.

Judgment dated 27.3.2024 in Comm.Arbitration Petition (L) No.2603 of 2024 of Cardinal Energy and Infra Structure Private Ltd Vs. Subramanya Construction and Development Co. Ltd.