A non-signatory prima facie shown to be a veritable party may be referred, leaving final determination to the tribunal.

Engineering Projects (India) Ltd. (“EPI”) issued a Notice Inviting Tender on behalf of Tripura University for construction and allied development works at the University campus on a turnkey basis.

M.P. Khaitan, the successful bidder, entered into an agreement with EPI on 19 May 2014, and the work was completed on 28 December 2018.

The petitioner raised a final bill on 20 December 2021, including escalation charges and release of the security deposit.

Although a University Committee accepted liability for the escalation bill on 17 January 2023, payment was not made.

The petitioner invoked arbitration against EPI under Clause 76 of the General Conditions of Contract by notice dated 11 July 2023 and filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“the Act”).

The University contested its impleadment, asserting that it was not a signatory to the petitioner’s agreement with EPI, while EPI contended that the University was responsible for making the corresponding payment under Clause 37.3 and was therefore a necessary party.

The Court applied Section 11(6) of the Arbitration and Conciliation Act, 1996, under which the referral court primarily examines the existence of an arbitration agreement and a prima facie dispute.

Section 12(5) invalidates the appointment of an arbitrator who falls within the statutory categories of ineligibility and also prevents such an interested official from appointing the arbitrator.

Relying on Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd. , 2025 SCC OnLine SC 2578, the Court held that an exclusive or unilateral appointment mechanism may be severed as void while the substantive arbitration agreement survives under the doctrine of severability.

Under Ajay Madhusudan Patel v. Jyotrindra S. Patel , (2025) 2 SCC 147, and Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd. , 2025 SCC OnLine SC 2746, the referral court may prima facie determine whether a non-signatory is a veritable party, while the arbitral tribunal retains jurisdiction under Section 16 to finally determine issues concerning party status and jurisdiction.

The Court also applied the principle that the invalidity of the appointment procedure does not destroy the underlying agreement to arbitrate.

The arbitration clause in Clause 76 was undisputed, and the petitioner’s claim concerning non-payment for completed work constituted a prima facie dispute between the petitioner and EPI.

Although Clause 76 vested appointment power in EPI’s CMD or his nominee, that mechanism was inconsistent with Section 12(5) because an official of a disputing party could not appoint the arbitrator; the offending portion was therefore severable without invalidating the agreement to arbitrate.

Regarding the University, the Court relied on the Minutes of Meeting, Clause 37.3, and the pending arbitration between EPI and the University.

These materials indicated that the University approved the work, was responsible for payment and escalation charges, and that EPI’s payment obligation to the petitioner depended upon receipt of payment from the University.

The Court consequently formed a prima facie view that the University was a veritable party, while leaving the final determination of impleadment, jurisdiction, and liability to the arbitral tribunal under Section 16.

The Court distinguished Ramacivil India Construction Pvt. Ltd. v. Central Public Works Department , 2026 SCC OnLine Del 4674, because that case did not involve comparable contractual provisions concerning approval, payment responsibility, and a pending payment dispute between the principal employer and the contracting agency.

It appointed Justice Sunil Gaur (Retd.) as the sole arbitrator and directed that the proceedings be conducted under the aegis of the Delhi International Arbitration Centre, with fees fixed according to the applicable schedule.

The arbitrator was directed to comply with Section 12 of the Act before entering upon the reference.

The Court clarified that its prima facie observation regarding the University’s status as a veritable party, and all other observations in the order, would not affect the merits of the dispute or the tribunal’s determination of jurisdiction and party status.

All pending applications were disposed of.