Delhi High Court Refers Skill Development Payment Dispute to Arbitration, Holds Non-Signatory Government Authorities May Be Prima Facie Bound by MoU
Facts
Indiacan Education Private Limited filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of a Sole Arbitrator under Article VIII, Clause 14 of the Memorandum of Understanding dated 2 April 2016. The MoU was executed between the petitioner and the National Institute of Rural Development, Hyderabad, in relation to a skill development project under the Deen Dayal Upadhyaya Grameen Kaushalya Yojna.
The Ministry of Rural Development had sanctioned the petitioner as a Project Implementation Agency for capacity building and skill development of rural youth in Jammu and Srinagar. The project cost was to be released in instalments, with funds flowing from the Ministry to NIRD, and thereafter to the petitioner. The first instalment was released, but disputes arose regarding release of further payments. The project was later transferred from NIRD to the Himayat Mission Management Unit/Jammu and Kashmir State Rural Livelihood Mission. The petitioner claimed non-payment of dues of ₹1,66,37,275 and invoked arbitration.
Issues
Whether the Delhi High Court had territorial jurisdiction to entertain the Section 11 petition.
Whether the Ministry of Rural Development and Himayat Mission Management Unit, though non-signatories to the MoU, could be referred to arbitration.
Whether the arbitration petition was barred by limitation.
Whether a Sole Arbitrator should be appointed for adjudication of the disputes.
Petitioner’s Arguments
The petitioner argued that the Ministry of Rural Development was a necessary and proper party because it was the sanctioning authority, funding authority and effective decision-making authority for the project. It was submitted that NIRD was only a pass-through and monitoring agency.
The petitioner further argued that respondent no. 3 became involved after the project was transferred from NIRD to the Himayat Mission Management Unit, and that the minutes of meeting dated 12 October 2021 recorded that the existing MoU remained valid and would be honoured by respondent nos. 2 and 3.
On jurisdiction, the petitioner submitted that the Ministry was situated in New Delhi and had issued sanction letters, exercised financial and administrative control, and played a central role in the project. It was argued that the Delhi High Court had jurisdiction, particularly when the arbitration clause did not specify any seat or venue.
The petitioner also contended that repeated communications by the respondents acknowledging the dues and stating that payment was under process constituted acknowledgments under Section 18 of the Limitation Act.
Respondent’s Arguments
The Ministry of Rural Development argued that it was neither a signatory to the MoU nor a party to the arbitration agreement. It contended that there was no privity of contract between the petitioner and the Ministry, and therefore it could not be referred to arbitration.
NIRD argued that after the project was transferred to respondent no. 3, its role was reduced to that of a Central Technical Support Agency, and it had no financial control over release of funds. It also argued that the MoU had become ineffective after transfer of the project.
Respondent no. 3 argued that it was neither a party nor signatory to the MoU, and no addendum was executed to bind it to the MoU or arbitration clause.
The respondents also objected to territorial jurisdiction, arguing that the MoU was executed in Hyderabad, the petitioner was based in Chennai, NIRD was in Hyderabad, and the project was to be implemented in Jammu and Kashmir. They further argued that the petition was barred by limitation.
Analysis of the Law
The Court held that where an arbitration clause is silent on seat, venue or place of arbitration, territorial jurisdiction must be determined by applying Section 2(1)(e) of the Arbitration Act along with Sections 16 to 20 of the CPC. The Court must consider where the cause of action arose and where the respondent resides or carries on business.
The Court examined the MoU, sanction letters and correspondence, and found that the Ministry had a substantial role in sanctioning the project, releasing funds, approving revisions, transferring the project and controlling aspects of implementation. The Court also noted that respondent no. 3 was later involved in the project after transfer and that the minutes of meeting recorded that the existing MoU would continue to be honoured.
On non-signatories, the Court held that at the Section 11 stage, the inquiry is prima facie. The Referral Court need not finally decide whether non-signatories are bound by the arbitration agreement where such determination requires detailed factual examination. That issue can be decided by the Arbitral Tribunal.
Precedent Analysis
The Court relied on Ravi Ranjan Developers Pvt. Ltd. v. Aditya Kumar Chatterjee, where the Supreme Court held that a Section 11 petition cannot be filed before any High Court irrespective of territorial jurisdiction, and that the Court must have a jurisdictional connection with the cause of action or parties.
The Court also relied on Alchemist Ltd. v. State Bank of Sikkim to reiterate that only material, integral and essential facts forming part of the lis constitute cause of action.
On non-signatories, the Court relied on Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd., Ajay Madhusudan Patel v. Jyotrindra S. Patel, and Cox and Kings Ltd. v. SAP India Pvt. Ltd., holding that conduct, relationship with signatories, commonality of subject matter, performance and participation may indicate that a non-signatory is a veritable party to the arbitration agreement.
On limitation, the Court relied on principles concerning acknowledgment of debt and held that the respondents’ communications prima facie constituted acknowledgments under Section 18 of the Limitation Act.
Court’s Reasoning
The Court found that although respondent nos. 1 and 3 had not signed the MoU, their role in sanctioning, funding, transferring, monitoring and processing the project showed sufficient prima facie involvement. Their conduct, relationship with the signatory parties, commonality of the subject matter, and role in performance of the project indicated that they could not be excluded at the referral stage.
The Court held that whether respondent nos. 1 and 3 are finally bound by the arbitration agreement is a matter to be decided by the Arbitral Tribunal after evidence and full adjudication.
On limitation, the Court held that the claim could not be rejected at the Section 11 stage as ex facie time-barred because the communications between 2018 and 2025 showed repeated acknowledgment that the petitioner’s payment request was under process.
The Court appointed Mr. Varun Chopra, Advocate, as Sole Arbitrator and left all rights and contentions of the parties open, including arbitrability, limitation, counterclaims, preliminary objections and merits.
Conclusion
The Delhi High Court disposed of the Section 11 petition by appointing a Sole Arbitrator to adjudicate the disputes between the parties. It held that respondent nos. 1 and 3 were prima facie veritable parties to the MoU despite being non-signatories, and that the final determination on their amenability to arbitration would be made by the Arbitral Tribunal. The Court also held that the petition could not be rejected as barred by limitation at the referral stage.
Case: Indiacan Education Private Limited v. Ministry of Rural Development & Ors.
Court: Delhi High Court
Case Number: ARB.P. 605/2025 & I.A. 11842/2026
Judge: Justice Mini Pushkarna
Date: 2 July 2026
Result: Petition disposed of; Sole Arbitrator appointed; all objections and merits left open for adjudication by the Arbitral Tribunal.
