Arbitral Tribunal's Refusal To Implead Proposed Parties Is Appealable: Bombay High Court

The Bombay High Court has held that where an arbitral tribunal finds it lacks jurisdiction over persons sought to be added to arbitration proceedings, such a decision can be challenged, though it declined to interfere with such a refusal in a dispute between two partners in a property development firm.

Justice Somashekar Sundaresan held that such intervention may be necessary because, “if the arbitration proceedings are conducted entirely without the involvement of someone who is later found, after the award is passed, to be a veritable party, the parties would be put to severe hardship with the entire arbitral proceedings being found to have been conducted without the necessary parties' involvement.”

The dispute arose from arbitration between Deepak Shripat More and Udaysingh Rajpurohit over their partnership firm, Shree Estate Ventures, formed in 2004 for property development in Bhayander.

Arbitration was invoked in December 2012, and the statement of claim was filed in 2014, with amendments in 2015 and 2024. In November 2024, More sought a further amendment to add Rajpurohit's wife Neema and Sakshi Infrastructure, a partnership firm of Rajpurohit and Neema, alleging partnership funds had been siphoned through fraudulent transfers.

The arbitral tribunal rejected the amendment application, including the impleadment request, holding that the case of fraud was not adequately made out and that the proposed parties were not veritable parties to the arbitration agreement.

Challenging this, More argued that substantial sums had been transferred from the partnership despite there being no contractual dealings with the recipients, making them veritable parties to the arbitration. Rajpurohit opposed the plea, arguing that the attempt came after nearly 12 years of arbitration and sought to fundamentally alter the nature of the dispute.

Examining the issue, the High Court held that where a tribunal accepts a plea that it lacks jurisdiction over persons sought to be added, that determination is open to challenge.

The court observed, " Section 37(2)(a) makes it clear that if the plea raised under Section 16(2) or Section 16(3) were to be accepted by the Arbitral Tribunal, the order so accepting is amenable to an appeal”

On merits, however, the court found no reason to interfere. It held that transfers of ₹25 lakh to Sakshi and ₹75 lakh to Rajpurohit, even if funds were later routed onward, did not establish that the proposed parties were veritable parties to the arbitration agreement. The court also noted that Rajpurohit had accepted accountability for the transactions as part of the partnership accounts.

"I must hasten to add that any comment in this judgement relates only to the element of impleadment and is not a comment on the merits of these facets in the final adjudication on merits,” the court held.

The court also found the attempt to seek impleadment in 2024 over transactions dating back to 2010, while relying on Covid-related limitation suspension, to be unreasonable and appearing to be an afterthought.

The petition was accordingly disposed of without interference.