Arbitration and Conciliation Act, 1996 – Appointment of arbitrators – Appellant-Corporation floated a tender and issued a purchase order in favour of the contractor-successful tenderer – Tender prohibited sub-letting, sub-contracting without the prior consent of the owner obtained in writing – Appellant issued notice to the contractor with regard to non-functioning and unsatisfactory performance – Later, the respondent informed the appellant that they were working as sub-vendor of the contractor and were entitled to receive 94% of the payment due – Appellant informed respondent that the appellant had not entered into any contract with the respondent and as such no payments due to the respondent from the appellant – Thereafter, series of proceedings between them – Respondent issued notice to the appellant invoking arbitration – Resolution of disputes between the respondent and the contractor, Settlement-cum-Assignment Agreement signed, to assign the receivables of contractor against the appellant to the respondent – Respondent then raised claim which was denied by the appellant – Respondent filed petition u/s.11(4) – High Court allowed application and appointed an arbitrator to adjudicate upon the disputes and differences between the parties – Justification:
Held: Referral court should be prima facie satisfied that there exists an arbitration agreement and as to whether the non-signatory is a veritable party – Even if the referral court prima facie arrives at the satisfaction that the non- signatory is a veritable party, the arbitral tribunal is not denuded of its jurisdiction to decide whether the nonsignatory is indeed a party to the arbitration agreement on the basis of factual evidence and application of legal doctrine – Appellant has no privity at all with the respondent – To the documentation between the contractor and the respondent, the appellant was not a party – Appellant and the respondent have been operating on separate orbits – Not been established even prima facie that there was any intention to bind respondent to the contract between appellant and contractor – Respondent not shown any consent for assignment as required under the clause of the tender document – Nothing even prima facie shown to establish that there was any semblance of an intent to effect legal relationship between the respondent and the party originally granting the contract and/or to indicate that the respondent was a veritable party – Applying the consensual theory or the non-consensual theory, the respondent not established its case to show even prima facie the existence of an arbitration agreement between appellant and the respondent – Settlement-cum-Assignment Agreement between contractor and respondent have been perused and under the clause, the contractor has represented and warranted that any amount/receivables accruing to the contractor as a result of litigation/proceeding initiated by respondent against the appellant was to be transferred to respondent – This does not mean that there is an arbitration agreement existing between the appellant and respondent or that respondent was a veritable party to the agreement between appellant and contractor – Respondent fails the prima facie test of being a veritable party to the arbitration agreement between the appellant and the contractor – Non-existence of an arbitration agreement between the parties – Thus, the judgment and order passed by the High Court set aside. [Paras 24, 30-32, 36, 38, 40, 42, 43]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain (2025) 1 SCC 611. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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