The Supreme Court held that a collaborator essential to the execution of a commercial contract can invoke the arbitration clause contained in the principal agreement, despite not being a direct signatory to the principal contract containing the arbitration clause.
A Bench comprising Justice K. Vinod Chandran and Justice Sanjay Kumar delivered the judgment in a dispute involving Elecon Engineering Company Limited and Bhartiya Rail Bijlee Company Limited over a coal handling plant package for the Nabinagar Thermal Power Project.
The Supreme Court overturned the High Court’s decision rejecting the arbitration plea seeking appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Background of the Case
The dispute arose from a contract awarded for installation of a Coal Handling Plant Package at the Nabinagar Thermal Power Project. The contractor had collaborated with Elecon Engineering to satisfy technical eligibility conditions required under the bid documents.
Under the tender conditions, bidders lacking certain technical qualifications could rely on collaborators, provided they executed a Deed of Joint Undertaking (DJU). Elecon executed such a DJU jointly with the contractor in favour of the employer company.
Later, the contractor entered liquidation proceedings. Following this, the employer repeatedly called upon Elecon Engineering to complete the pending obligations under the project and also warned of action at Elecon’s risk and cost.
What Happened During the Hearing
Senior Advocate Sridhar Potaraju, appearing for Elecon Engineering, argued that the company was inseparably connected to the execution of the contract because the contractor could not have qualified for the tender without Elecon’s technical credentials.
On the other hand, Senior Advocate Aman Lekhi contended that the collaborator was not a direct signatory to the main agreement containing the arbitration clause. It was further argued that a later tripartite agreement did not contain any arbitration provision.
The Supreme Court examined the tender documents, the DJU, subsequent correspondence, and the tripartite agreement executed after the contractor’s financial difficulties.
Court’s Key Observation
The Supreme Court observed that the collaborator had “joint and several” responsibilities alongside the contractor for successful execution of the project.
The Bench held that the DJU formed an “inextricable part” of the principal contract and that the collaborator was a “veritable party” to the agreement.
The Court said:
“The meetings convened between the Employer, the Contractor and the Collaborator... makes the Collaborator a veritable party to the contract.”
The Bench further clarified that the later tripartite agreement did not extinguish the original contractual obligations or the arbitration mechanism contained in the principal contract.
Court’s Decision / Final Order
Allowing the appeal, the Supreme Court set aside the Delhi High Court judgment and appointed former Orissa High Court Chief Justice Justice (Retd.) Chakradhari Sharan Singh as the sole arbitrator to adjudicate the disputes between the parties.
The Court directed the arbitrator to furnish disclosures under Section 12 of the Arbitration and Conciliation Act within 15 days.
Case Details Section
Case Title: Elecon Engineering Company Limited v. Bhartiya Rail Bijlee Company Limited & Anr.
Case Number: Civil Appeal arising out of SLP (C) No. 33128 of 2025
Court: Supreme Court of India
Judge: Justice K. Vinod Chandran and Justice Sanjay Kumar
Date: May 7, 2026
