Commercial Links With Party Insufficient To Refer Non-Signatory To Arbitration: Bombay High Court
The Bombay High Court on 29 September held that a company cannot be referred to arbitration merely because it has a commercial connection with a contracting party or the project in dispute. A non-signatory can be referred to arbitration only when material prima facie establishes its consent to be bound by the arbitration agreement.
Justice Amit Borkar appointed advocate Tushad Kakalia as sole arbitrator to resolve a dispute over Rs. 12.37 crore in construction dues between New Consolidated Construction Company Ltd. and Limitless Contracting Pvt. Ltd., while declining to refer Man Realty and Purvankara to arbitration. He held:
“...merely having some connection with one contracting party or with the project in which the contract was performed cannot by itself make a person a party to the arbitration.”
The dispute arose from four work orders executed on 25 September 2017 between New Consolidated Construction Company, a subcontractor, and Limitless Contracting for construction work at the One Park Avenue project in Thane. The parties executed an addendum on 17 February 2020.
Meanwhile, the NCLT initiated insolvency proceedings against DHFL on 3 December 2019, approved its resolution plan on 7 June 2021, and Piramal Housing Finance acquired DHFL in September 2021.
Purvankara subsequently took over the project. New Consolidated Construction Company claimed outstanding dues of approximately Rs. 12.37 crore and alleged that its construction materials were wrongfully withheld after the project's land and development rights were transferred in October 2024. It sought to implead Man Realty, the project owner and parent company of Limitless Contracting, and Purvankara in the arbitration.
The Court held that Man Realty's participation in project meetings and correspondence did not establish that it had accepted the arbitration clause or assumed Limitless Contracting's contractual liabilities. Its status as the project owner and parent company was insufficient to establish consent to arbitration.
Further, the Bench declined to refer Purvankara to arbitration, noting that the sale documents identified its sister concern, Purva Oak Pvt. Ltd., as the purchaser. No assignment, novation or other legal arrangement established that Purvankara had become bound by the original arbitration agreement.
Accordingly, the High Court appointed Tushad Kakalia as sole arbitrator to resolve the dispute between New Consolidated Construction Company Ltd. and Limitless Contracting Pvt. Ltd., while declining to refer Man Realty and Purvankara to arbitration.
For Applicant: Advocates Jash Gandhi with Chirag Sancheti, Asif Lampwala, Saad Memon, and Hriday Karia i/by Bulwark Solicitors
For Respondents: Advocates Harsh Moorjani with Jay Zaveri, Tavleen Saini i/by Crawford Bayley & Co, Ankit Lohia with Ujjwal Batra, and Aditya Seth i/by Sujit Lahotia and Associates, Mutahhar Khan with Apoorv Karekar, and Aakash Mehta i/by Khaitan & Co.