Impleadment Without Privity Of Contract Or Arbitration Agreement Unsustainable: Delhi High Court Removes IIM Jammu From Arbitration Proceedings
Impleadment based solely on beneficiary status would have far-reaching consequences
Justice Harish Vaidyanathan Shankar, Delhi High Court
The Delhi High Court has held that IIM Jammu cannot be impleaded in arbitration proceedings arising out of a construction contract with the Central Public Works Department (CPWD), holding that in the absence of privity of contract or any arbitration agreement with the contractor, its impleadment was legally unsustainable.
The Bench emphasised that the agreements giving rise to the dispute were executed exclusively between the contractor and CPWD, and the arbitration clause existed only in that agreement. It warned that allowing impleadment based solely on beneficiary status would have far-reaching consequences, potentially dragging multiple non-signatories into arbitration and undermining party autonomy.
Justice Harish Vaidyanathan Shankar allowed chamber appeals filed by Ramacivil India Construction Pvt Ltd and set aside orders of the Joint Registrar which had permitted the impleadment of the Indian Institute of Management (IIM) Jammu in arbitration proceedings arising out of a construction contract awarded by the CPWD.
The Bench categorically observed, “Arbitration, being consensual in nature, cannot be expanded to include entities solely because they derive indirect advantage or bear institutional interest in the project”.
“…this Court is of the considered opinion that the Impugned Orders passed by the learned Judicial Registrar in all three Chamber Appeals suffer from fundamental errors. The reasoning adopted therein overlooks the settled position of law that arbitration is founded upon consent and that a party can be subjected to arbitral proceedings only if it is bound by the arbitration agreement. In the absence of privity of contract between the Petitioner and IIM Jammu, and there being no material to demonstrate that the said entity is a signatory to, or otherwise bound by, the arbitration agreement, its impleadment is legally unsustainable”, the Bench further observed.
Senior Advocate Anurag Ahluwalia appeared for the petitioner and Vikram Jetly, CGSC, Senior Advocate Sandeep Sharma appeared for the respondent.
In the matter, the dispute was regarding a contract for construction of the academic block at the proposed IIM Jammu campus. While the Memorandum of Understanding for the project was executed between IIM Jammu and CPWD, the actual construction agreement containing the arbitration clause was signed only between Ramacivil and CPWD.
Challenging its impleadment, the contractor argued that there was no privity of contract between it and IIM Jammu. IIM Jammu, however, contended that it was the principal entity, funded the project, supervised construction, and was the ultimate beneficiary, making its presence necessary.
Rejecting this argument, the Court held that arbitration is founded on consent and cannot be expanded merely because an entity benefits from the project.
The Court also rejected reliance on IIM Jammu’s supervisory role and its involvement in meetings, noting that such participation did not create contractual privity. Even the contractor’s letter seeking IIM’s intervention during disputes was held to be merely a request for facilitation, not evidence of contractual relationship.
“The contractual framework thus recognises CPWD as the nodal authority responsible for supervision, communication and contractual enforcement vis-à-vis the contractor. The role envisaged for IIM Jammu remains advisory and supervisory in a limited sense, and does not translate into contractual control or privity. Acceptance of the reasoning adopted in the Impugned Order would effectively rewrite the contractual architecture by permitting IIM Jammu to assume a direct supervisory and contractual role inconsistent with the express terms of the agreement itself. Such an interpretation cannot be sustained”, the judgment read.
Accordingly, the Court set aside the impleadment orders and directed that the arbitration proceedings continue only between the contracting parties, Ramacivil and CPWD.
Cause Title: M/S Ramacivil India Construction Pvt Ltd Through Its Authorized Representative Director Sh R N Gupta v. Central Public Works Department Through Its Addl Director General [Neutral Citation: 2026:DHC:1579]
Appearances:
Petitioner: Anurag Ahluwalia, Sr. Adv., Avinash Trivedi, Ritika Trivedi, Anurag Kaushik, Rhythem Nagpal, Jatin Arora, Rahul Aggarwal, Rishank Gola & Aryan Sangwan, Advocates.
Respondent: Vikram Jetly, CGSC, Laavanya Kaushik, Shreya Jetly, Khyaati Bansal, Sandeep Sharma, Sr. Adv., Praveen Kumar Jain, Rashmi Kumari, Yash Chauhan, Anchal Yadav & Aditya Rathi, Advocates. Alongwith Cmdr. Kesavan Baskkaran, CAO, IIM Jammu.