Case Note & Summary
The appeals arose from three arbitral awards passed in disputes relating to the construction of mustard seed processing and storage silos in Rajasthan. The appellant, a cooperative federation, engaged National Heavy Engineering Co-operative Ltd. (NHEC) as project management consultant, which in turn contracted with Shirke Structurals Pvt. Ltd. to execute the works. After completion, Shirke claimed unpaid amounts and filed civil suits. NHEC successfully applied under Section 8 of the Arbitration and Conciliation Act, 1996, referring the disputes to arbitration. In arbitration, the appellant initially filed a written statement and counter-claim but later withdrew the counter-claim and objected to jurisdiction, arguing it was not a party to the agreement containing the arbitration clause. The arbitral tribunal passed awards holding both the appellant and NHEC jointly liable. NHEC’s challenge under Section 34 was allowed by the District Court, Pune, which held that NHEC was merely an agent and that the appellant, as principal, was solely liable. The appellant’s simultaneous Section 34 petition was rejected, leading to the present appeals under Section 37. The appellant contended that it had no privity of contract with Shirke and that the award was per se without jurisdiction. It also argued that the District Court improperly modified the award by deleting NHEC’s liability. Shirke and NHEC countered that the agreements were interwoven, the appellant was the principal employer, and its conduct—including participation in contractor selection, meetings, and the arbitration itself—evidenced consent. The High Court examined the contractual structure, noting that the agreement defined the appellant as the 'Purchaser' and that NHEC acted as its consultant. The analysis focused on the composite nature of the contracts and the appellant’s role. The judgment was reserved on March 11, 2025, and pronounced on November 3, 2025.
Headnote
A) Arbitration - Binding Non-Signatory - Composite Agreements and Agency - Arbitration and Conciliation Act, 1996, Sections 8, 34 - The principal employer was not a signatory to the contractor’s agreement but was defined as the 'Purchaser' and had appointed the project management consultant that executed the agreement. The court observed that the agreements were interwoven and the principal employer’s active participation in the project and arbitration proceedings indicated implied consent to the arbitration agreement. (Paras 7-14)
B) Arbitration - Partial Setting Aside of Award - Modification vs. Severance - Arbitration and Conciliation Act, 1996, Section 34 - The District Court maintained the award against the principal employer while setting aside the liability of the agent, prompting the appellant to argue that this was an impermissible modification. The respondents contended that partial setting aside is allowed if it does not affect the remaining portions. (Paras 8, 11)
C) Arbitration - Jurisdiction - Participation Under Protest - Arbitration and Conciliation Act, 1996, Section 8 - The principal employer initially filed a written statement and counter-claim in the arbitration, then withdrew the counter-claim and raised a jurisdictional objection, claiming participation under protest. The court noted the sequence of actions as relevant to the question of consent. (Paras 5(g), 7, 13)
Issue of Consideration
Whether a non-signatory to an arbitration agreement can be bound by an arbitral award; whether the District Court could partially set aside an arbitral award; whether participation in arbitration under protest precludes a jurisdictional challenge.
Final Decision
Not mentioned in the provided excerpt
Law Points
- privity of contract
- non-signatory bound by arbitration agreement
- agency relationship
- partial setting aside of arbitral award
- party autonomy
- implied consent under Section 8
- composite contracts
- reference to arbitration
- Section 34 challenge
- Section 37 appeal
Case Details
2025 LawText (BOM) (11) 27
Arbitration Appeal No. 47 of 2013 with Arbitration Appeal No. 48 of 2013 and Arbitration Appeal No. 49 of 2013
Somasekhar Sundaresan, J.
Rajiv Narula for Appellant; Sukand Kulkarni for Respondent No.1; Archita Gharat and Prabhakar M. Jadhav for Respondent No.2
Rajasthan State Co-op Oil Seed Growers Federation Ltd. (Tilam Sangh)
B.G. Shirke Construction Technology Pvt. Ltd. & Anr.
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Nature of Litigation
Arbitration appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against orders of District Court Pune disposing challenges to three arbitral awards.
Remedy Sought
The appellant sought to set aside the arbitral award and the District Court’s order holding it liable, arguing lack of jurisdiction due to absence of privity of contract.
Filing Reason
The appellant contended it was not a party to the agreement containing the arbitration clause and that the arbitral tribunal had no jurisdiction over it.
Previous Decisions
The District Court, Pune, allowed NHEC’s Section 34 petition, holding NHEC was a mere agent and setting aside the award against it, while upholding the award against the appellant. The Supreme Court had earlier disposed of a special leave petition granting leave to raise jurisdictional grounds in the Section 34 challenge.
Issues
Whether Tilam Sangh, a non-signatory to the Agreement, can be bound by the arbitral award.
Whether the District Court could partially set aside the award by excusing NHEC from liability while maintaining it against Tilam Sangh.
Whether Tilam Sangh’s participation in arbitration constituted consent to jurisdiction.
Submissions/Arguments
Appellant argued it was not a party to the agreement and thus the award was without jurisdiction; its participation was under protest; modifying the award by deleting NHEC’s liability was impermissible.
Respondent No.1 argued the agreements were interwoven, Tilam Sangh was the principal employer, participated in the arbitration and even filed a counter-claim; partial setting aside is permissible.
Respondent No.2 argued its role was as an agent of Tilam Sangh, and Tilam Sangh’s implied consent to the arbitration was evident from its conduct.
Ratio Decidendi
Not extracted from the provided excerpt
Judgment Excerpts
At the heart of Mr. Rajiv Narula’s submissions lies the contention that there was no scope for privity of contract between Shirke and Tilam Sangh, and therefore, the Arbitral Award is per se without jurisdiction.
The very title clause in the Agreement identifies NHEC as the PMC of Tilam Sangh. The term “Delegated Constituted Purchaser” is used to describe NHEC, which is also identified as “PMC”, but more importantly, the term “the Purchaser” is defined to mean Tilam Sangh.
The Section 34 Court having set aside the Arbitral Award in relation to NHEC’s challenge could not have deleted NHEC’s liability and maintained the Arbitral Award as against Tilam Sangh – this would constitute modification of the Arbitral Award, which is impermissible.
Procedural History
On November 6, 1987, Tilam Sangh executed a PMC Contract with NHEC. NHEC executed an Agreement dated September 28, 1989, appointing Shirke as contractor. Work was completed and a certificate of completion was issued on October 31, 1993. On April 4, 1994, Shirke made a payment claim. Shirke filed Special Civil Suit No. 1734 of 1995. NHEC’s application under Section 8 of the Arbitration Act was allowed, referring the parties to arbitration. Tilam Sangh filed a written statement and counter-claim on May 20, 2002. On April 4, 2003, Tilam Sangh withdrew the counter-claim and raised a jurisdictional objection. An arbitral award was passed on June 2, 2003, holding Tilam Sangh and NHEC jointly liable. A special leave petition in the Supreme Court was disposed of granting leave to raise jurisdictional grounds in a Section 34 challenge. Tilam Sangh and NHEC filed separate Section 34 petitions. On July 18, 2013, the District Court, Pune, upheld the award against Tilam Sangh but set it aside against NHEC, holding NHEC was merely an agent. Tilam Sangh filed appeals under Section 37. The High Court reserved judgment on March 11, 2025, and pronounced it on November 3, 2025.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 37, 34, 8
