M.P Khaitan vs Engineering Projects (India) Limited & Anr.

Court
Delhi High Court

$~3
* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of decision: 01.09.2026

# CNR No. DLHC010066052026
+ ARB.P. 340/2026, I.A. 4840/2026 & I.A. 4841/2026
M.P KHAITAN .....Petitioner
Through: Mr. Rajat Joneja and Mr.
Anmol Kumar, Advs.

versus

ENGINEERING PROJECTS (INDIA) LIMITED & ANR.
.....Respondents
Through: Ms. Preeti Dubey, Adv. for R-1.
Dr. Amit George, Mr. Rajeev
Kumar, Ms. Alka Srivastava,
Mr. Vaibhav Gandhi and Ms.
Tanushree Gupta, Advs. for R-
2.
CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN

AVNEESH JHINGAN, J. (ORAL)
1. This petition is filed under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (for short ‘the Act’) seeking appointment of an
arbitrator.
2. The brief facts are that on 12.04.2014, respondent
no.1/Engineering Projects (India) Limited (hereinafter referred to as
‘EPI’) issued a Notice Inviting Tender (for short ‘NIT’) on behalf of
respondent no.2/Tripura University (hereinafter referred to as ‘the
University’) for carrying out construction of various buildings and
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allied development works at the Tripura University Campus,
Suryamaninagar, Tripura (West) on a turnkey basis.
2.1 The petitioner was the successful bidder and the Letter of Intent
(LOI) was issued on 03.05.2014. The agreement between the
petitioner and EPI was executed on 19.05.2014. The work was
completed on 28.12.2018. The final bill was raised on 20.12.2021
which included escalation charges and release of the security deposit.
On 28.12.2021, EPI claimed the enhanced rate from the University.
Despite the Committee of the University accepting by its report dated
17.01.2023 the liability for the escalation bill, the University failed to
clear the dues. The attempts between EPI and the University to resolve
the dispute failed and arbitration was invoked by EPI.
2.2 Aggrieved by the non-receipt of the payment due, the petitioner
invoked arbitration under Clause 76 of the General Conditions of
Contract (for short ‘GCC’) by issuing notice dated 11.07.2023 and
hence the present petition.
3. Clause 76 of the GCC is reproduced below:
76.0 ARBITRATION
76.1 Before resorting to arbitration as per the
cause given below, the parties if they so agree
may explore the possibility of conciliation as
per the provisions of Part-III of the Arbitration
and Conciliation Act. 1996. When such
conciliation has failed, the parties shall adopt
the following procedure for arbitration:
i) Except where otherwise, provided for in the
contract, any disputes and differences relating
to the meaning of the Specifications, Design,
Drawings and Instructions therein before
mentioned and as to the quality of
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workmanship or materials used in the work or
as to any other question, claim, right, matter or
thing whatsoever in any way arising out of or
relating to the Contract, Designs, Drawings,
Specifications, Estimates, Instructions, or
these conditions, or otherwise concerning the
works or the execution or failure to execute-
the same whether arising during the progress
of the work or after the completion or
abandonment thereof shall be referred to the
Sole Arbitration of the Chairman and
Managing Director (CMD) of Engineering
Projects (India) Limited (EPI), or any other
person discharging the functions of CMD of
EPI and if CMD or such person discharging
the functions of CMD of EPI is unable to act,
to the sole Arbitration of some other person
appointed by CMD of EPI or such other
person discharging the functions of CMD of
EPI. There will be no objection the arbitrator
so appointed is an employee of Engineering
Projects (1) Ltd. However, such an employee
shall not have directly dealt with the said
Contract or the works there under on behalf of
EPI. Such Arbitrator shall be appointed within
30 days of the receipt of letter of invocation of
arbitration duly satisfying the requirements of
this clause.
(ii) If the arbitrator so appointed resigns or is
unable or unwilling to act due to any reason
whatsoever, or dies, the Chairman &
Managing Director aforesaid or in his absence
the person discharging the duties of the CMD
of EPI may appoint a new arbitrator in
accordance with these terms and conditions of
the contract, to act in his place and the new
arbitrator so appointed may proceed from the
stage at which it was left by his predecessor.
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(iii) It is a term of the contract that the party
invoking the arbitration shall specify the
dispute/differences or questions to be referred
to the Arbitrator under this clause together
with the amounts aimed in respect of each
dispute.
iv) The Arbitrator may proceed with the
arbitration ex-parte, if either party, in spite of
a notice from the arbitrator, fails to take part in
the proceedings.
v) The work under the contract shall continue
as directed by the Engineer-in- Charge, during
the arbitration proceedings.
vi) Unless otherwise agreed, the venue of
arbitration proceedings shall be at the venue
given in the "Memorandum' to the 'Form of
Tender’.
vii) The award of the Arbitrator shall be final,
conclusive and binding on both the parties.
viii) Subject to the aforesaid, the provisions of
the Arbitration and Conciliation Act, 1996 or
any statutory modifications or re-enactment
thereof and the Rules made there under and
for the time being in force shall apply to the
arbitration proceedings and Arbitrator shall
publish his Award accordingly.

NOTE

NOTWITHSTANDING ANYTHING
CONTAINED HEREINABOVE, THIS
CLAUSE SHALL NOT BE APPLICABLE
WHERE THE DISPUTE IS BETWEEN EPI
AND ANOTHER CENTRAL PUBLIC
SECTOR ENTERPRISE OR GOVT. OF
INDIA DEPARTMENT, FOR WHICH A
SEPARATE ARBITRATION CLAUSE IS
PROVIDED VIDE CLAUSE NO. 76.2
GIVEN BELOW:

76.2 ARBITRATION BETWEEN CENTRAL
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PUBLIC SECTOR ENTERPRISES INTER
SE/GOVERNMENT OF INDIA
DEPARTMENTS/MINISTRIES

i) In the event of any dispute or difference
relating to the Interpretation and application of
the provisions of the contract, such dispute or
difference shall be referred by either party to
the arbitration as per the instructions (Office
Memorandums/Circulars) issued by Govt. of
India from time to time with regard to
arbitration between one Government
Department and another, one Government
Department and a Public Sector Enterprise and
Public Sector Enterprise inter se.

ii). Subject to any amendment that may be
carried out by the Government of India from
to time, the procedure to be followed in the
arbitration shall be as is contained in D.O. No.
DPE/4(10)/2001-PMA-GL-I dated 22.01.2004
of Department of Public Enterprises, Ministry
of Heavy Industries and Public Enterprise,
Government of India or any modification
issued in this regard.

4. Learned counsel for the University on instructions, vehemently
contends that the University is not a signatory to the work allotted to
the petitioner and is not a necessary party. Reliance is placed upon the
decision of the Supreme Court in Hindustan Petroleum Corporation
Ltd. v. BCL Secure Premises Pvt. Ltd. , 2025 SCC OnLine SC 2746 to
contend that this Court has to decide at the stage of Section 11(6) of
the Act as to whether the non-signatory is a veritable party. Further
reliance is on the decision of this Court in Ramacivil India
Construction Pvt. Ltd. v. Central Public Works Department , 2026
SCC OnLine Del 4674 to buttress the contention that the co-ordinate
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bench has taken a view in similar circumstances that the principal
party on whose behalf the NIT is issued is not a veritable party and
impleading such party shall create a chaos.
5. Learned counsel for the EPI relies upon Clause 37.3 of the GCC
to contend that University is to make payment to the EPI and after
having received the payment, it is to be released to the petitioner and
the University is a necessary party. The submission is that in respect
of this very dispute, an arbitration is pending between EPI and the
University.
6. Clause 37.3 of the GCC is reproduced below:
“It is clearly agreed and understood by the Contractor
that notwithstanding anything to the contrary that may
be stated in the agreement between EPI and the
Contractor, the Con tractor shall become entitled to
payment only after EPI has received the
corresponding payment(s)- from the Client/ Owner
for the work done by the Contractor. Any delay in the
release of payment by the Client/ Owner to EPI
leading to delay in the release of the corresponding
payment by EPI to the Contractor shall not entitle the
Contractor to any compensation/ interest from EPI.”

7. Learned counsel for the petitioner submits that a valid
arbitration clause exists in the agreement and there is a dispute
between the petitioner and EPI with regard to payment of the amount
due. The submission is that the arbitrator can decide all the issues
including the impleadment of the University. The reliance is on the
Minutes of Meeting of the Committee of the University dated
17.01.2023 (for short ‘Minutes of Meeting’) to contend that not only
the work is to be approved by the University but the payment is also to
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be made by the University.
8. The scope of the reference court under Section 11(6) of the Act
is well defined. The existence of an arbitration clause and a prima
facie dispute is to be seen.
9. The arbitration clause is not in dispute. There is a dispute
between the petitioner and EPI with regard to the release of the
amount for the work executed. Clause 76 provides for the arbitration
by the Chairman and Managing Director of EPI (for short ‘CMD’) or
by an arbitrator appointed by the CMD.
10. After the incorporation of Section 12(5) of the Act, the law is
well settled that an official of a party to the dispute can neither be
appointed as an arbitrator nor can appoint an arbitrator. The portion of
Clause 76 of the GCC which is in violation of Section 12(5) of the Act
is void and does not dent the substantive agreement to arbitrate
dispute between the parties.
11. The Supreme Court in Hindustan Construction Company Ltd.
v. Bihar Rajya Pul Nirman Nigam Ltd. and Ors. , 2025 SCC OnLine
SC 2578 dealt with an arbitration clause providing that no person
other than a person appointed by the Managing Director or
administrative head of the Nigam should act as arbitrator and if such
appointment is not possible then the matter is not arbitrable. It was
held that the exclusive power with the contractee to appoint arbitrator
is unenforceable and should be severed but the agreement of
arbitration survives. The portion of the clause that for any reason the
arbitration by the arbitrator appointed by the contractee is not possible
the matter shall not be referred to arbitration at all violates Section 18
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of the Act. The relevant paragraphs of the judgment are reproduced
below:
“61. Accordingly, the portion of Clause 25
that vests exclusive appointment power in one
party and forecloses arbitration in default of
such appointment must be severed as void and
unenforceable. However, the substantive
agreement to arbitrate survives by virtue of the
doctrine of severability.

*
63. The present contract, being a public-
private contract, must withstand not only
conventional contractual scrutiny but also
constitutional scrutiny. As held in CORE Il,
arbitral appointments in public contracts must
satisfy the requirements of fairness, equality,
and non-arbitrariness under Article 14.

64. The sub-clause in Clause 25 which
provides that "if for any reason the matter
shall not be referred to arbitration" is vague,
uncertain, and arbitrary. The expression "for
any reason" confers an unguided and absolute
veto, particularly objectionable in a public
contract. Such a clause fails the test of
manifest arbitrariness and violates Section 18
of the Act, which mandates equal treatment of
parties.

65. In light of the above discussion, the
following propositions emerge:
(i) The parties' conduct clearly demonstrates
their intention to arbitrate, satisfying the
requirement of Section 7(4)(c);
(ii) Clause 25, in its substantive form,
constitutes a valid arbitration agreement;
(iii) The unilateral and exclusionary
appointment mechanism is void and severable;
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and
(iv) This Court is empowered under Section
11(6) to cure the defect and appoint an
independent arbitrator.

66. Accordingly, it is held that a valid and
subsisting arbitration agreement exists
between the parties. Clause 25, when read in
its entirety and construed in accordance with
the doctrine of severability, satisfies the
statutory requirements of an arbitration clause
under Section 7 of the Act. The contrary
finding of the High Court is unsustainable in
law and is liable to be set aside.”

12. There exist a valid arbitration clause and a prima facie dispute
between the petitioner and EPI, an arbitrator has to be appointed. A
specific query raised as to whether the University is a veritable party
to the arbitration can be dealt with by the arbitrator and any
observations made by this Court may have a bearing on the
proceedings. Learned counsel for the University, on instructions,
emphatically insists that the issue be dealt with by this Court. It is on
the insistence of learned counsel that the observations below are being
made.
13. The Supreme Court in Ajay Madhusudan Patel & Ors. v.
Jyotrindra S. Patel & Ors. , (2025) 2 SCC 147 held:
“76.7. Cox & Kings specifically dealt with
the scope of inquiry under Section 11 when
it comes to impleading the non-signatories
in the arbitration proceedings. While saying
that the referral court would be required to
prima facie rule on the existence of the
arbitration agreement and whether the non-
signatory party is a veritable party to the
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arbitration agreement, it also said that in
view of the complexity in such a
determination, the Arbitral Tribunal would
be the proper forum. It was further stated
that the issue of determining parties to an
arbitration agreement goes to the very root
of the jurisdictional competence of the
Arbitral Tribunal and can be decided under
its jurisdiction under Section 16.”

(Emphasis supplied)

14. The Supreme Court in Hindustan Petroleum Corporation Ltd.
(supra) held that upon arriving at a prima facie satisfaction that a non-
signatory is a veritable party, the arbitral tribunal is not denuded of its
jurisdiction to decide on the basis of the factual evidence with regard
to the relevance of the party to be impleaded in the proceedings.
15. This Court on the basis of the undisputed Minutes of the
Meeting showing the authority of the University in approving the
work, releasing the payment and escalation charges; Clause 37.3 of
the GCC showing the dependency of EPI and the petitioner on the
University for payment; the issue with regard to payment of dues is
already pending in arbitration between EPI and the University; and the
stand of EPI that the University is a veritable party, is prima facie of
the opinion that the University is a veritable party.
16. The decision of this Court in Ramacivil India Construction
Pvt. Ltd. (supra) was stated to be on similar facts. However, there was
no clause in that case stipulating that the work was to be approved by
the principal employer on whose behalf the NIT was issued, the
payment was to be made by the principal employer and that the
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payment itself was in dispute between the principal employer and the
agency issuing the NIT. The decision is not applicable to the present
case.
17. Needless to say, no observations made in this order shall be
construed as an expression of opinion on the merits of the dispute
between the parties and shall not influence the arbitral proceedings.
18. Accordingly, the petition is allowed by appointing Justice
Mr.Sunil Gaur (Retd.) (Mobile No. 9971000718) as the sole arbitrator
for adjudication of the disputes which have arisen between the parties.
19. Arbitral proceedings will be held under the aegis of Delhi
International Arbitration Centre (DIAC). Fee of the Arbitrator shall be
fixed as per fee schedule.
20. Before entering upon reference, the learned Arbitrator will
comply with Section 12 of the Act.
21. It is made clear that since this Court has not expressed any
opinion on the merits of the rival claims of the parties and it will be
open for the parties to file their respective claims/counter claims
before the learned Arbitrator which will be considered in accordance
with law.
22. All pending applications stand disposed of.
23. A copy of this order be forwarded to the learned Arbitrator for
information.


AVNEESH JHINGAN, J
SEPTEMBER 1, 2026/Pa

Reportable: Yes
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