What are the circumstances under which a non- signatory to an arbitration agreement may be impleaded in an arbitration proceedings under Section 16 as a necessary Party? (Arbitration)

Era Infra Engineering Limited V.   National Highways Authority Of India & Anr – High Court of Delhi (ARB. A. (COMM.) 47/2025 & I.A. 22290/2025).

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.

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 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:  

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.

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.

 In ONGC Ltd. v. Discovery Enterprises (P) Ltd., (2022) 8 SCC 42 it was held:

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:

• The mutual intent of the parties;
• The relationship of a non-signatory to a party which is a signatory to the agreement;
• The commonality of the subject-matter;
• The composite nature of the transactions; and
• The performance of the contract.