The case pertains to a dispute that arose between RBCL Piletech Infra (RBCL) and Bholasingh Jaiprakash Construction Ltd. (BJCL/Respondent No. 1) with reference to a work order. The National Thermal Power Corporation (NTPC/ Respondent No.2) was the owner of the project site, while Bharat Heavy Electrical Ltd. (BHEL/Respondent No. 3) was involved in the construction work taking place on the project site.
The dispute arose when RBCL claimed to have incurred damages through the course of the project and invoked the arbitration clause present in the work order against BJCL. However, RBCL also issued a notice to NTPC and BHEL for recovery of damages, even though they were not parties to the arbitration agreement. Although NTPC and BHEL protested their inclusion in the arbitration for the lack of privity of contract among the parties, RBCL filed the present petition under section 11(6) of the Arbitration and Conciliation Act (A&C Act).
The Delhi High court, firstly, emphasized that the law regarding the inclusion of a non-signatory in arbitral proceedings has been long settled in the case of Cox and Kings v SAP India Pvt. Ltd., where the court talked about the Group of Companies Doctrine as a basis to include non-signatories.
However, the Delhi High court states that that the Group of Companies Doctrine is not the only route through which non-signatories can be included in arbitration proceedings. The Court, here, referred to the decision in Ameet Lalchand Shah v. Rishabh Enterprises, where the Supreme Court held that a non-signatory can be included in case, it is a party to inter-connected agreements made to achieve a common commercial goal. Building on this, the court in the present case held that the non-signatories can be included in arbitration proceedings if they have a contractual relationship which makes them responsible for obligations towards the claimant.
Relying on this logic, the court analyzed the clauses in the work order and concluded that a series of payments to be released to RBCL needed approval of BHEL according to the order, and thus held, that BHEL is being rightly included in the arbitration proceedings due to the contractual obligation of payment they hold towards RBCL. However, the court held that because NTPC does not hold any contractual obligation towards RBCL, NPCL could not be made a party in the arbitration proceedings.
The court, relying on previous judgments, broadened the scope for the inclusion of non-signatories in arbitration proceedings by culling out a scenario beyond the Group of Companies Doctrine.