Elecon Engineering Company Limited vs Bhartiya Rail Bijlee Company Limited

Non-Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No..........of 2026 [@ Special Leave Petition (C) No.33128 of 2025]

Elecon Engineering Company Limited ...Appellant Versus

Bhartiya Rail Bijlee Company Limited & Anr.

...Respondents

JUDGMENT

K. Vinod Chandran, J.

Leave granted.

2. A Collaborator’s request for arbitration, which

collaboration was essential to technically qualify the

Contractor to proffer a bid was declined on the ground of

there being no privity of contract. The High Court

considering a petition under Section 11(6) of the Arbitration

and Conciliation Act, 1996 (Act of 1996) rejected the same Signature Not Verified Digitally signed by babita pandey against which the present appeal is filed. We refer to the Date: 2026.05.07 16:53:39 IST Reason:

parties as the Employer; the 1st respondent herein, the

Page 1 of 10 CA @ SLP(C) No.33128 of 2025 Contractor; the 2nd respondent and the Collaborator; the

appellant.

3. The High Court noticed the trite principle that even

non-signatories to an agreement with an arbitration clause

would be entitled to invoke it, if such non-signatory is a

veritable party to the arbitration agreement. However,

finding that there was nothing in the notice under Section 21

of the Act of 1996 to find such inextricable connection; the

notice also having specifically sought for a consent to initiate

an arbitration, declined the prayer.

4. Learned Senior Counsel Sri Sridhar Potaraju,

appearing for the appellant took us through the initial bid

document itself to urge that without the collaboration, the

Contractor would not have been able to satisfy the eligibility

criteria of experience in design and commissioning of an

integrated bulk material handling plant with rated capacity

of 1000 Metric tonnes per hour or above for coal/other

minerals of a minimum period of one year. The Collaborator

was thus an inextricable party to the contract, which also

required submission of ‘Deed of Joint Undertaking’ (DJU)

Page 2 of 10 CA @ SLP(C) No.33128 of 2025 executed jointly by the Collaborator and the Contractor.

Later, the Contractor having slipped into liquidation the

Employer called upon the Collaborator to take up the full

responsibility for the successful performance of the contract

as per the DJU dated 22.02.2010 submitted along with the bid

documents.

5. Sri Aman Lekhi, learned Senior Counsel on the other

hand submits that the very notice under Section 21, as has

been found by the High Court, sought a consent for

arbitration, which reveals the understanding of the

Collaborator itself that the contract between the parties, did

not contain a clause for resolving the disputes through

arbitration. The tripartite agreement entered into by the

Collaborator with the Employer and the Contractor does not

contain such a clause which eclipses any earlier contract.

Though a combined, complementary role was contemplated

initially as of now, the Contractor having gone into

liquidation, no claim can be raised against the Employer by

the Collaborator.

Page 3 of 10 CA @ SLP(C) No.33128 of 2025

6. The bid document along with the special conditions of

contract and general conditions of contract produced as

Annexure P1 clearly stipulates the qualification requirements

for bidders and provides for the eligibility to be satisfied

through collaborations in which event the bidder is required

to furnish DJU’s executed by the bidder and the

collaborator/associate for successful performance of the

relevant system, as per the NTPC format enclosed with the

bid documents. The contract awarded was for installing a

Coal Handling Plant Package for Nabinagar Thermal Power

Project of the respondent, the Employer. The successful

bidder/Contractor, the 2nd respondent collaborated with the

appellant for its design capabilities and supply of certain

equipment/materials based on the latter’s experience in a

project of the required strength and its successful operation

for one year. The bid form also contains various DJUs to be

executed by ‘a Collaborator/Associate’ along with the

Contractor for the Coal Handling Plant for Nabinagar

Thermal Power Project. The DJU was executed by the

Collaborator with the Contractor, in favour of the Employer

Page 4 of 10 CA @ SLP(C) No.33128 of 2025 which clearly indicates that the Collaborator was an

inseparable part of the contract and its execution.

7. The DJU was executed on 22.02.2010, as is available at

Annexure P2 and there is no dispute that the contract entered

into between the Contractor and the Employer has an

arbitration clause. The question to be decided is as to

whether the Collaborator/Associate is a veritable party to the

contract, which from the very terms of the contract and those

discernible from the bid document and requirements

thereof, has to be answered in the affirmative.

8. The fact also remains that in the course of the

execution of the contract, the Contractor was faced with a

liquidation proceeding and ordered to be liquidated on

16.01.2020. The High Court in rejecting the arbitration

request had referred to and extracted the letters invoking

arbitration, issued by the Collaborator on 02.07.2022 and

responded to by the Employer, on 29.07.2022, to decline the

request. We see from the letter dated 02.07.2022 produced

as Annexure P10 that the Collaborator had specifically

referred to the DJU and the delay caused in the execution of

Page 5 of 10 CA @ SLP(C) No.33128 of 2025 the project by reasons only of the default of the Contractor,

upon which there was even an encashment of the bank

guarantee submitted by the Collaborator, which was also

described as wrongful. It was specifically pointed out that, on

the Contractor failing to fulfil its obligations, the Collaborator

was called upon to fulfil its obligations as a sub-vendor of the

Contractor for the Coal Handling Project. It was pursuant to

the decisions taken in the meetings convened, pursuant to

the above referred communication; which was also attended

by the Contractor, that a tripartite agreement was entered

into between the Contractor, the Collaborator and the

Employer dated 05.04.2016; produced as Annexure P8. The

tripartite agreement specifically authorized payments to the

Collaborator with respect to the outstandings against the

earlier supplies and those to be supplied in future by the

Collaborator, to be paid directly to the Collaborator.

9. Subsequently, communication dated 08.10.2021,

Annexure P9, was issued by the Employer which again called

upon the Collaborator to fulfil its obligations as per the DJU

furnished at the inception and it was also threatened that on

Page 6 of 10 CA @ SLP(C) No.33128 of 2025 failure, the Employer will be constrained to execute the

balance work at the risk and cost of the Collaborator. It is also

to be noticed that the consent required by the Collaborator

in the letter dated 02.07.2022 was for reference of the matter

to the Delhi International Arbitration Centre and not

necessarily a consent for resolving the dispute through

arbitration; which provision was already available in the

agreement executed by the contractor to which the

Collaborator is an essential and inextricable part. The

communications issued pursuant to the default of the

Contractor is a reaffirmation of the obligation of the

Collaborator as per the contract executed, of which the DJU

is an inextricable part. The tripartite agreement only

asserted the responsibility of the Collaborator to fulfill the

contract and was only a measure of ensuring payments to the

Collaborator directly, in the wake of the inability of the

Contractor and does not wipe out the earlier contract.

10. In response to the notice under Section 21, the

Employer specifically referred to the DJU and the ‘joint and

several’ responsibilities of the Contractor and the

Page 7 of 10 CA @ SLP(C) No.33128 of 2025 Collaborator to complete the project. The tripartite

agreement was also referred to along with various letters

issued by the Employer to the Collaborator for effective

completion of the project. Despite the Employer having

called upon the Collaborator to fulfil its obligations as per the

DJU, due to the disability of the Contractor, the Employer

asserted absence of privity of contract and refused consent

for adjudication of the dispute between themselves in its

letter dated 29.07.2022.

11. We are of the opinion that the contract by itself

necessitated the execution of joint undertaking by the

Contractor and the Collaborator who had the ‘joint and

several’ liability for the due completion of the contract. The

arbitration clause applied both to the Collaborator and the

Contractor in so far as the disputes with the Employer and

between themselves the agreement of collaboration

provided a like clause for dispute resolution. On the

Contractor defaulting in the completion of the project, the

Employer had also called upon the collaborator to fulfil the

obligations as per the DJU specifically raising the issue of

Page 8 of 10 CA @ SLP(C) No.33128 of 2025 joint and several responsibilities. The meetings convened

between the Employer, the Contractor and the Collaborator,

after delay in execution of the contract, the tripartite

agreement entered into between them and the further

communications addressed to the collaborator to take up his

responsibility as per the DJU makes the Collaborator a

veritable party to the contract who is also entitled to invoke

the arbitration clause as available in the contract between the

Contractor and the Employer in which the DJU executed by

the Collaborator and the Contractor, in favour of the

Employer is an inextricable part.

12. On the above reasoning, we find the High Court to

have wrongly declined the prayer for arbitration. We set

aside the judgment impugned and allow the petition filed

under Section 11(6) of the Act of 1996. Justice (Retd.)

Chakradhari Sharan Singh, (former Chief Justice of the Orissa

High Court, Mobile No.: +91 94310 15002) is appointed as the

sole Arbitrator to adjudicate upon the disputes between the

parties. All contentions available to the parties are left open

to be urged before the Arbitrator.

Page 9 of 10 CA @ SLP(C) No.33128 of 2025

13. The learned Arbitrator will proceed in accordance

with law and make his declaration in terms of Section 12 of

the Arbitration and Conciliation Act, 1996 within a period of

15 days from the date a copy of this judgment is received by

him. He shall be paid in terms of the Fourth Schedule to the

Act of 1996.

14. The Registry is directed to intimate/inform the

appointment made by us to the learned Arbitrator.

15. The above appeal is allowed with the above

directions.

.......…….……………………. J.

(SANJAY KUMAR)

....……….……………………. J.

(K. VINOD CHANDRAN)

NEW DELHI;

MAY 07, 2026.

Page 10 of 10 CA @ SLP(C) No.33128 of 2025