Is a Refusal to Implead Third Parties Appealable? The Bombay High Court Clarifies the Scope of Section 37 and the "Veritable Party" Doctrine in Long-Standing Partnership Arbitrations.
Arbitration is often celebrated for its private nature, confined strictly to the parties who signed the contract. But what happens when the money at the heart of the dispute has allegedly siphoned off to "outsiders"—spouses, subsidiary firms, or third-party entities? A recent judgment by the Bombay High Court in Deepak Shripat More v. Udaysingh Harinarayansingh Rajpurohit & Ors. provides a masterclass in the jurisdictional boundaries of the Arbitral Tribunal and the surprising avenues for appealing procedural decisions.
The Appealability of a "No"The most striking takeaway from this judgment is the court's clarification on whether a refusal to implead a third party is appealable. Generally, under the Arbitration and Conciliation Act, 1996, the list of appealable orders is strictly limited to prevent judicial interference. However, the Court bridged a vital gap: when a Tribunal refuses to implead a third party because they are not part of the arbitration agreement, it is essentially "accepting a plea" that it lacks jurisdiction over them.
This brings the order squarely within the ambit of Section 37(2)(a). It is a counter-intuitive realization for many practitioners who view impleadment as a mere procedural step. The Court reasoned that if a decision ends the matter for a specific party by asserting a lack of authority over them, it must be subject to a statutory check and balance.
The "Veritable Party" DoctrineThe judgment delves deep into the concept of a "veritable party"—a non-signatory who is so intertwined with the dispute that their presence is necessary for a complete adjudication. The Petitioner argued that because funds were transferred to the Respondent’s wife and her firm, they were veritable parties. The Court, referencing the Supreme Court’s stance in ASF Buildtech, noted:
"Determinations made by the arbitral tribunal — including on issues of jurisdiction and impleadment — are amenable to challenge under Section 16 of the Act, 1996 and, thereafter, under Section 37."
This reinforces the principle that while the Arbitral Tribunal is the primary gatekeeper of its own jurisdiction (Kompetenz-Kompetenz), its decisions on who belongs in the room are not shielded from appellate scrutiny if they result in a jurisdictional rejection.
Accountability vs. PrivityA fascinating nuance in this case was the distinction between "where the money went" and "who is responsible." The Respondent admitted that the funds moved to his wife’s firm but took full accountability for those transactions within the partnership accounts. The Court found this pivotal. If the signatory partner accepts the financial liability, the need to drag a non-signatory third party into the arbitration vanishes.
This highlights a pragmatic boundary: arbitration is a creature of contract. Just because a tracing action might be necessary to find assets doesn't automatically mean the recipients of those assets must become parties to the arbitration, especially if the contractual partner stands behind the transactions.
The "Afterthought" and the Covid-19 ShieldThe Court’s critique of the litigation’s timeline serves as a stern reminder to practitioners. The arbitration had been pending for twelve years. The Petitioner attempted to use the Covid-19 pandemic as a justification for the delay in seeking impleadment for transactions that occurred in 2010. The Court was unimpressed, labeling the move an "afterthought" to expand the "pain points" of the litigation.
This underscores a growing judicial intolerance for using the pandemic as a blanket excuse for procedural lethargy, particularly when the facts were known long before the lockdowns began. It emphasizes that equity aids the vigilant, not those who sleep over their rights for a decade.
A Forward-Looking BalanceUltimately, the Bombay High Court struck a delicate balance. It opened the door for the appeal (holding it maintainable) but closed the door on the merits (finding no perversity in the Tribunal's refusal). This judgment ensures that while parties have a right to challenge jurisdictional exclusions, the sanctity of the arbitration agreement and the efficiency of the process remain protected from eleventh-hour attempts to complicate the proceedings.
Case: DEEPAK SHRIPAT MORE v. UDAYSINGH HARINARAYANSINGH RAJPUROHIT
Law: Arbitration and Conciliation Act.
Citation: 2026:BHC-OS:12448
Decision Date: 04-05-2026