Multi-party government projects often involve entities whose operational role extends beyond the formal contract. One authority may sanction and fund the project, another may execute the agreement, and a third may later assume responsibility for implementation or payment. When such a structure gives rise to arbitration, the questions of territorial jurisdiction and non-signatory participation can become closely intertwined. The Delhi High Court considered this issue in Indiacan Education Private Limited v. Ministry of Rural Development & Ors1. The Memorandum of Understanding had been executed in Hyderabad between Indiacan Education Private Limited and the National Institute of Rural Development (“NIRD”) for a project in Jammu and Kashmir. The arbitration clause specified neither a seat nor a venue. When disputes arose over unpaid project dues, the petitioner invoked arbitration against all three respondents and approached the Delhi High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996. The Court was required to address two connected questions: whether Delhi had sufficient territorial nexus to entertain the Section 11 petition despite the absence of a designated arbitral seat, and whether the conduct and role of the non-signatory public authorities supplied a prima facie basis for referring them to arbitration. The Court answered both questions in favour of reference, while preserving the arbitral tribunal’s authority to finally determine whether the non-signatories were bound by the arbitration agreement.
Territorial Jurisdiction and the Referral of Non-Signatories
The dispute arose under the Deen Dayal Upadhyaya Grameen Kaushalya Yojana. MoRD sanctioned and funded the project, while NIRD entered into the MoU with the petitioner and acted as the monitoring and pass-through agency. The project was subsequently transferred to the Himayat Mission Management Unit in Jammu and Kashmir.
After completion of the project, Indiacan claimed that approximately ₹1.66 crore remained unpaid. The ensuing correspondence continued to involve the respondents in questions concerning project closure, audit, transfer of responsibility and release of funds. When payment remained unresolved, Indiacan invoked arbitration against all three respondents.
The respondents challenged the maintainability of the Section 11 petition on territorial jurisdiction, non-signatory status and limitation.
On territorial jurisdiction, the Court held that where the arbitration clause does not identify the seat, venue or place of arbitration, jurisdiction over a Section 11 petition must be determined by reading Section 2(1)(e) of the Arbitration Act with the relevant provisions of the Code of Civil Procedure. The inquiry therefore turns on where the respondent resides or carries on business and where the cause of action, wholly or in part, has arisen.
Relying on BBR (India) Pvt. Ltd. v. S.P. Singla Constructions Pvt. Ltd.2, Ravi Ranjan Developers Pvt. Ltd. v. Aditya Kumar Chatterjee3, and the Delhi High Court decisions in Prashant Kumar Parashar v. Sumit Singla4 and Faith Constructions v. N.W.G.E.L Church5, the Court emphasised that the jurisdictional facts must have a material nexus with the dispute.
That nexus was found in MoRD’s role in the project. The MoU contemplated funding through MoRD, internal audit by MoRD, consultation with MoRD for project modifications, and MoRD’s supervisory role in implementation. The sanction and revised sanction were also issued by MoRD from New Delhi, and subsequent communications concerning release of the disputed amount continued to involve the Ministry.
The Court therefore held that a material part of the cause of action had arisen in Delhi and that the Delhi High Court had territorial jurisdiction to entertain the Section 11 petition.
The more significant issue concerned the two non-signatory respondents.
Applying the Supreme Court’s jurisprudence in Cox and Kings Limited v. SAP India Private Limited6, Ajay Madhusudan Patel v. Jyotrindra S. Patel7 and Hindustan Petroleum Corporation Limited v. BCL Secure Premises Private Limited8. The Court examined whether the conduct and relationship of MoRD and the Himayat Mission Management Unit with the underlying transaction supplied a prima facie basis to treat them as “veritable parties” to the arbitration agreement.
The inquiry remained one of consent, assessed through the surrounding transaction. Relevant factors included the relationship between the signatories and non-signatories, commonality of subject matter, the composite nature of the transaction, and participation in performance, administration or termination.
The Court found sufficient prima facie material in the role of both entities.
MoRD had sanctioned and funded the project, retained supervisory and contractual powers, and remained involved in decisions concerning implementation and payment. The Himayat Mission Management Unit had assumed administration of the project following its transfer and was involved in the subsequent process concerning release of funds.
The October 2021 meeting was particularly significant. The minutes recorded that the existing MoU remained valid despite the absence of the contemplated addendum and contemplated further action concerning payment by the State-level entity.
Taken together, these circumstances were sufficient for the Court to hold, on a prima facie basis, that the non-signatories could be referred to arbitration.
The Court also clarified the allocation of jurisdiction between the referral court and the arbitral tribunal. The referral court was required to satisfy itself that sufficient prima facie material existed to bring the non-signatories within the arbitral process. The final determination of whether they were in fact bound by the arbitration agreement remained with the arbitral tribunal under Section 16.
This distinction is central to the judgment. The Delhi High Court finally determined its own territorial jurisdiction, while the question of arbitral jurisdiction over the non-signatories was examined only at the prima facie stage and preserved for final determination by the tribunal.
The respondents also raised limitation, relying on the fact that the project had been completed in 2020 while arbitration was invoked in 2025. The Court considered the subsequent communications concerning pending payment sufficient, prima facie, to engage Section 18 of the Limitation Act, 1963. The legal effect of those communications was left for final determination by the arbitral tribunal.
The petition was accordingly allowed and the disputes were referred to arbitration.
Conclusion
Indiacan Education is significant for the manner in which it separates the jurisdiction of the referral court from the jurisdiction of the arbitral tribunal.
Where the arbitration clause does not specify a seat, the Section 11 court must independently establish territorial jurisdiction by identifying a material part of the cause of action within its territory. In multi-State or multi-agency arrangements, the actual allocation of funding, supervision, decision-making and payment functions may therefore become central to the jurisdictional analysis.
The judgment also reinforces the consent-based approach to non-signatories. A non-signatory may be referred to arbitration where its conduct, relationship with the signatories and participation in the underlying transaction provide sufficient prima facie evidence that it was intended to be bound. Formal execution of the arbitration agreement is therefore only one part of the inquiry.
The central takeaway for Section 11 practice is the distinction between the two jurisdictional inquiries. The referral court must determine whether it has authority to entertain the petition. Once a prima facie case exists for referring a non-signatory, the tribunal retains the final determination on consent and jurisdiction under Section 16.
That distinction gives the judgment its principal relevance for arbitration practitioners.
Citations
Expositor(s): Adv. Jahnobi Paul
