Delhi High Court Refers DDU-GKY Dispute To Arbitration, Leaves Issue Of Ministry's Liability To Tribunal

On 2 July, the Delhi High Court referred the disputes arising out of the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) project between Indiacan Education Pvt. Ltd. and the National Institute of Rural Development (NIRD) and others to arbitration and appointed advocate Varun Chopra as the sole arbitrator.

Justice Mini Pushkarna observed that in a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, courts must ordinarily leave the question of whether a non-signatory to a Memorandum of Understanding is a “veritable party” to the arbitration agreement to the arbitral tribunal when its determination requires appreciation of pleadings and evidence. The Bench held:

“Having regard to the limited scope and standard of judicial scrutiny under Section 11 of the Arbitration Act, this Court considers it inappropriate to make a conclusive determination as to whether respondent nos. 1 and 3 are veritable parties to the arbitration agreement. The said issue necessarily entails an extensive appreciation of pleadings and evidentiary material. Accordingly, the final determination of whether respondent nos. 1 and 3 are amenable to the arbitral proceedings is best left to be adjudicated by the Arbitral Tribunal.”

The dispute arose from a Memorandum of Understanding dated 2 April 2016, which Indiacan Education Pvt. Ltd. and NIRD executed for implementing a DDU-GKY skill development project in Jammu and Kashmir, a Central Government programme aimed at providing livelihood opportunities to rural youth through industry-linked training.

The Ministry of Rural Development sanctioned the project on 11 February 2016 at a cost of Rs.1.34 crore and later revised it on 19 December 2016 by extending the project tenure from one year to three years and enhancing the project cost to Rs.1.40 crore.

Indiacan claimed that after it achieved contractual milestones, it became entitled to the second instalment of Rs.70.08 lakh. It further stated that although the project later transferred to the Himayat Mission Management Unit of the Jammu and Kashmir State Rural Livelihood Mission in November 2018, it completed the work and submitted its closure report on 13 May 2020, but the authorities did not release its dues.

Invoking the dispute resolution clause under Article VIII, Clause 14 of the MoU, Indiacan issued an arbitration notice on 5 February 2025 claiming Rs.1.66 crore and approached the High Court under Section 11(6) after the respondents failed to constitute an arbitral tribunal. While the Ministry of Rural Development did not respond to the arbitration notice, NIRD and the Himayat Mission Management Unit declined to initiate arbitration.

Indiacan argued that the Ministry exercised financial and administrative control over the project, funded it, and retained termination powers under the MoU, making it a necessary party to the arbitration. The Ministry contended that it did not sign the MoU, lacked privity of contract with Indiacan, and ceased to have any role after the project's transfer in November 2018. NIRD submitted that it functioned only as a technical support agency after the transfer.

Relying on settled principles governing Section 11 proceedings, the Court reiterated that it undertakes only a prima facie examination at the referral stage and cannot conclusively decide disputed questions of fact on the binding nature of arbitration agreements involving non-signatories.

Accordingly, the High Court held that such issues, including whether the Ministry of Rural Development and the Himayat Mission Management Unit are bound by the arbitration agreement, must be decided by the arbitral tribunal and left all questions open for adjudication.

Appearances for Indiacan Education Private Limited: Senior Advocate Anil Airi with Advocates Vishal Tyagi, Jasmin Sokhi, Harsh Gautam, Sadhna Sharma, Sumant Nayak, Shraddha and Vedant Goel.

Appearances for Ministry of Rural Development: Advocates Premtosh K. Mishra, Shrey Sharma, Anubhav Upadhyay and Arpit Bamal.

Appearances for National Institute of Rural Development (NIRD): Advocates Chetanya Puri, Vidhi Gupta, Nisha Puri and Rishab Jain.

Appearances for Himayat Mission Management Unit, Jammu & Kashmir State Rural Livelihood Mission: Advocates Parth Awasthi and Simran Sharma.