Further debugging on the issue revealed that in the method that observes for BeforeDeploy event
public void executeBeforeDeploy(@Observes BeforeDeploy event, TestClass testClass) never gets invoked because the type
TestClass cannot be resolved in any of the active context, specificaly the method org.jboss.arquillian.core.impl.ManagerImpl.resolve(Class<T>) returns null when trying to resolve org.jboss.arquillian.test.spi.TestClass so method org.jboss.arquillian.core.impl.ObserverImpl.invoke(Manager, Object) doesn't invoke the observer's method, since arguments contain null.
The test class of my project is registered in the active context org.jboss.arquillian.test.impl.context.ClassContextImpl
Do you think this is a bug or something is configured wrong from my side?
Your using CR5 I would assume. The exposure of TestClass in the ClassContext is not currently released, it's fixed in the master branch.
You are right that was the issue, now its working fine.