Challenge To Impleadment Of Non-Signatory In Arbitration Maintainable Only After Award: Delhi High Court

The Delhi High Court has reiterated that where an arbitral tribunal rejects a jurisdictional objection, including to the impleadment of a non-signatory, the challenge to such a decision can be raised only after the tribunal proceeds with the arbitration and makes an award.

On this basis, the court dismissed as not maintainable an appeal filed by Ocean View Properties LLP against an order of the arbitral tribunal impleading it as a party to the proceedings, even though it was not a signatory to the arbitration agreement.

Justice Harish Vaidyanathan Shankar observed that “the statutory mandate necessitates that any challenge mounted to an order passed in exercise of powers relatable to Section 16 must remain circumscribed by Section 16(5) of the Act, and any challenge thereto would be permissible only at the stage contemplated therein.”

The tribunal's order, passed on September 17, 2024, had directed that Ocean View Properties LLP be added as a party in arbitration proceedings involving Baleshwar Sharma and others.

The LLP approached the High Court challenging this order.

At the outset, the respondents raised a preliminary objection to the maintainability of the appeal. They submitted that the order of impleadment was, in substance, referable to the tribunal's exercise of jurisdiction under Section 16, which empowers it to rule on its own jurisdiction, including questions as to the existence or scope of the arbitration agreement.

Reliance was placed on the Supreme Court's decision in ASF Buildtech (P) Ltd. v. Shapoorji Pallonji & Co., which recognises that the power to implead a non-signatory is traceable to the tribunal's jurisdiction under Section 16.

Accepting this submission, the Court held that the power to add a non-signatory flows from the tribunal's jurisdiction to decide its own authority. It further noted that once such a jurisdictional objection is rejected, the tribunal is required to continue the proceedings and make an arbitral award.

In such circumstances, the Court held that a challenge to the order cannot be entertained at this stage.

The appeal was accordingly dismissed as not maintainable, and the arbitral proceedings were permitted to continue.

For Petitioner (Ocean View Properties LLP): Advocates Abhishek Malhotra, Pranay Ranjan, Youkteshwari Prasad.

For Respondent (Baleshwar Sharma & Ors.): Advocates Tushar Jarwal, Bilal Ikram, Faraahat Ashar Shahab, Parth Shekhar, Shubham Singh.