NLA Insights
20 July 2026
The Supreme Court, in Elecon Engineering Company Limited v. Bhartiya Rail Bijlee Company Limited and Ors., considered whether a collaborator that was not a formal signatory to the main contract containing the arbitration clause could nevertheless invoke arbitration against the employer. The Court held that where the collaborator was an essential and inextricable part of the contractual arrangement, and had assumed joint and several obligations under a deed of joint undertaking, it could invoke the arbitration clause contained in the contract between the employer and the contractor.
The judgment is significant because it applies the principle that non-signatories may, in an appropriate case, be treated as veritable parties to an arbitration agreement. The Court looked beyond the absence of the collaborator’s signature on the main contract and examined the bid documents, deed of joint undertaking, tripartite agreement and subsequent conduct of the parties.
The dispute arose out of a contract for installation of a Coal Handling Plant Package for the Nabinagar Thermal Power Project. Bhartiya Rail Bijlee Company Limited was the employer, while the second respondent was the contractor. Elecon Engineering Company Limited, the appellant, was the collaborator.
The bid documents required the bidder to satisfy certain technical eligibility criteria. In particular, the bidder was required to demonstrate experience in design and commissioning of an integrated bulk material handling plant with a rated capacity of 1000 metric tonnes per hour or above for coal or other minerals for at least one year. The contractor relied on the collaborator’s technical capability to satisfy this requirement.
The bid documents also required a deed of joint undertaking to be executed jointly by the contractor and the collaborator in favour of the employer. Accordingly, the collaborator and contractor executed a deed of joint undertaking dated 22 February 2010. Under this arrangement, the collaborator’s role was not merely incidental; its technical experience was essential to the contractor’s qualification and to the performance of the project.
During execution of the contract, the contractor defaulted and delayed performance, leading to meetings between the employer, contractor and collaborator. These meetings were followed by a tripartite agreement dated 05 April 2016, which authorised direct payments to the collaborator for outstanding and future supplies. The contractor was subsequently ordered to be liquidated on 16 January 2020, following which the employer continued to call upon the collaborator to fulfil its obligations under the deed of joint undertaking.
By a communication dated 08 October 2021, the employer again called upon the collaborator to fulfil its obligations under the deed of joint undertaking and warned that, in the event of failure, the balance work would be executed at the collaborator’s risk and cost.
The collaborator invoked arbitration by notice dated 02 July 2022. By its response dated 29 July 2022, the employer refused the request on the ground that there was no privity of contract between itself and the collaborator. The High Court dismissed the collaborator’s petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, following which the collaborator approached the Supreme Court.
The central issue before the Supreme Court was whether the collaborator, though not a formal signatory to the main contract between the employer and the contractor, could invoke the arbitration clause contained in that contract.
The connected question was whether the collaborator could be treated as a veritable party to the arbitration agreement because of its role under the bid documents, deed of joint undertaking, tripartite agreement and subsequent communications.
The collaborator argued that the contractor could not have technically qualified for the project without the collaborator’s experience. The bid documents themselves contemplated collaboration and required execution of a deed of joint undertaking by the contractor and collaborator. The collaborator therefore submitted that it was an inextricable part of the contract and its performance structure.
The collaborator further relied on the employer’s conduct after the contractor went into liquidation. The employer continued to call upon the collaborator to perform the contract and fulfil obligations under the deed of joint undertaking, which, according to the collaborator, demonstrated its integral role in the contractual framework.
The employer argued that the notice invoking arbitration sought consent to initiate arbitration, showing that the collaborator itself understood that it was not covered by the arbitration clause. It also submitted that the tripartite agreement did not contain an arbitration clause and had superseded or eclipsed the earlier arrangement. According to the employer, since there was no direct contract containing an arbitration clause between the employer and collaborator, the Section 11 petition was rightly dismissed.
The Supreme Court allowed the appeal and set aside the High Court’s judgment. It held that the collaborator was a veritable party to the contract and was entitled to invoke the arbitration clause.
The Court noted that the bid documents expressly contemplated collaboration. The contractor relied on the collaborator’s design capability and technical experience to satisfy the eligibility conditions. The deed of joint undertaking was not a peripheral document; it was part of the bid structure and was executed by the contractor and collaborator in favour of the employer.
The Court observed that the deed of joint undertaking showed that the collaborator was an inseparable part of the contract and its execution. The main contract itself required the joint undertaking, under which the contractor and collaborator assumed joint and several responsibility for due completion of the project.
The Court also rejected the employer’s argument that the tripartite agreement wiped out the earlier contractual arrangement. According to the Court, the tripartite agreement was entered into after the contractor faced difficulties and was intended to ensure direct payments to the collaborator. It did not extinguish the earlier contract or the obligations flowing from the deed of joint undertaking.
The Court placed significant weight on the employer’s own conduct. After the contractor defaulted and went into liquidation, the employer called upon the collaborator to perform obligations under the deed of joint undertaking. It also threatened execution of balance work at the collaborator’s risk and cost. The employer’s communications reaffirmed that the collaborator had obligations under the original contractual framework.
The Supreme Court further clarified that the collaborator’s request for consent in its notice was for reference of the dispute to the Delhi International Arbitration Centre, and not necessarily for consent to arbitrate. The arbitration clause already existed in the main contract, of which the collaborator was held to be an essential and integral part.
The judgment reinforces that, in an appropriate case, a non-signatory may be entitled to invoke an arbitration clause where the contractual documents and the conduct of the parties establish that it was an essential and participating party to the transaction. The decision illustrates that this inquiry must be undertaken by considering the contractual framework as a whole rather than merely the absence of the non-signatory’s signature on the main contract.
The decision is especially relevant to infrastructure, EPC and public project contracts, in which technical collaborators or associates may play a critical role in bidder qualification and project execution. Where such entities execute joint undertakings, assume joint and several obligations and are treated by the employer as responsible for performance, courts may look beyond strict privity in determining whether they are veritable parties to the arbitration agreement.
The judgment also underscores the importance of the parties’ conduct. On the facts of the case, the employer’s reliance on the collaborator’s obligations under the deed of joint undertaking to demand performance supported the conclusion that the collaborator was entitled to invoke the dispute resolution mechanism forming part of the same contractual framework.
The Supreme Court’s decision in Elecon Engineering Company Limited v. Bhartiya Rail Bijlee Company Limited and Ors. clarifies that a collaborator may invoke an arbitration clause even if it is not a formal signatory to the main contract, provided that the contractual documents and the parties’ conduct establish that it is an inextricable and veritable party to the contractual arrangement.
The Court set aside the High Court’s order and allowed the Section 11(6) petition. Justice (Retd.) Chakradhari Sharan Singh, former Chief Justice of the Orissa High Court, was appointed as the sole arbitrator to adjudicate the disputes between the parties.
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