{"id":346269,"date":"2025-04-22T14:00:25","date_gmt":"2025-04-22T08:30:25","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=346269"},"modified":"2025-04-23T16:49:07","modified_gmt":"2025-04-23T11:19:07","slug":"non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2025\/04\/22\/non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news\/","title":{"rendered":"Non-issue of notice to certain parties under S. 21 of A&C Act does not strip the Arbitral Tribunal of its jurisdiction to implead: SC"},"content":{"rendered":"
\n

Supreme Court:<\/span> The issue instant appeal was whether service of notice invoking arbitration under Section 21<\/a> of the Arbitration and Conciliation Act, 1996<\/a> (A&C Act) on a person and joinder of such person in the application under Section 11 for appointment of arbitrator are prerequisites for an arbitral tribunal to exercise jurisdiction over him, and further, when can an arbitral tribunal implead a person to the arbitration proceedings. The Division Bench of P.S. Narasimha*<\/span> and Manoj Misra, JJ., held that a notice invoking arbitration under Section 21<\/a> of the A&C Act<\/a> is mandatory as it fixes the date of commencement of arbitration, which is essential for determining limitation periods and the applicable law, and it is a pre-requisite to filing an application under Section 11<\/a> of the A&C Act<\/a>. However, merely because such a notice was not issued to certain persons who are parties to the arbitration agreement does not strip the arbitral tribunal of its jurisdiction to implead them as parties during the arbitral proceedings.<\/p>\n

Background:<\/h3>\n

The appellant and Respondent 1 entered into an agreement dated 01-06-2012 to form a Limited Liability Partnership by the name of Vishal Capricorn Energy Services LLP to carry out various oil and gas sector projects.<\/p>\n

By letter of award dated 31-12-2012, Oil India Ltd. Awarded a contract for augmentation of storage capacity at ITF, Tenughat, Assam to a consortium, of which Respondent 1 was a member. By agreement dated 08-01-2013, the consortium sub-contracted the ITF Project to Respondent 1. Pursuantly, the appellant and Respondent 1 entered into a Supplementary Agreement and a Memorandum of Understanding, both dated 29-01-2013, for execution of the ITF Project through Respondent 2. The appellant infused funds of Rs. 1.1 crores for the execution of this Project.<\/p>\n

Disputes arose in 2018 when the appellant sought documents and information to audit Respondent 2’s accounts in relation to the ITF Project. On 17-11-2020, the appellant issued a notice invoking arbitration under Arbitration Clause of the LLP Agreement only to Respondent 1. The appellant then filed a Section 11 application for appointment of arbitrator, impleading only Respondent 1 as a party. After the arbitrator entered reference, the appellant filed its statement of claim, wherein it also impleaded Respondents 2 and 3 as parties to the arbitration. The objection was raised that the arbitration is not maintainable against Respondents 2 and 3 as they were not parties to the notice invoking arbitration under Section 21 or the application for appointment of arbitrator under Section 11<\/a> of the A&C Act<\/a>.<\/p>\n

In the meanwhile, the appellant preferred an application under Section 23(3)<\/a> of the A&C Act<\/a> to amend the statement of claim in order to bring on record a detailed memo of parties and to amend the prayer clause to include Respondents 2 and 3 as well.<\/p>\n

By order dated 15-02-2024, the arbitral tribunal allowed the application under Section 16 and held that the arbitral proceedings against Respondents 2 and 3 are not maintainable. The arbitral tribunal, while determining its own jurisdiction under Section 16, took the view that service of a Section 21 notice and being made party to the Section 11 application are mandatory requirements for a person\/entity to be made party to the arbitral proceedings. By the impugned order, Delhi High Court had affirmed and upheld this reasoning in exercise of its appellate jurisdiction.<\/p>\n

Court’s Assessment:<\/h3>\n

Perusing the facts and legal trajectory of the case, the Court stated that Section 21 falls under Part I, Chapter V of the A&C Act<\/a>, which deals with “Conduct of arbitral proceedings”. A plain reading of the provision shows that in the absence of an agreement between the parties, arbitral proceedings are deemed to have commenced when the respondent receives a request to refer disputes to arbitration. Therefore, Section 21 does not expressly mandate the claimant to send a notice invoking arbitration to the respondents<\/span>. However, the provision necessarily mandates such notice, as its receipt by the respondent is required to commence arbitral proceedings<\/span>, unless the parties have mutually agreed on another date\/event for determining when the arbitral proceedings have commenced.<\/p>\n

Furthermore, by fixing the date of commencement of arbitral proceedings by anchoring the same to a notice invoking arbitration, Section 21 of the ACA fulfils various objects that are time-related. The receipt of such notice is determinative of the limitation period for substantive disputes as well as the Section 11 application, and also the law applicable to the arbitration proceedings.<\/p>\n

In the instant case, a Section 21 notice was undisputedly issued by the appellant, but the problem arose because this notice was issued only to Respondent 1. However, there is nothing in the wording of the provision or the scheme of the A&C Act to indicate that merely because such notice was not served on Respondents 2 and 3, they cannot be impleaded as parties to the arbitral proceedings. Non-service of the notice under Section 21 and the absence of disputes being raised against Respondents 2 and 3 in the appellant’s notice dated 17-11-2020 do not automatically bar their impleadment as parties to the arbitration proceedings.<\/p>\n

Delving into Section 11<\/a> of the A&C Act<\/a>, the Court stated that Section 11 application can be preferred by a party when the procedure for appointment stipulated in the arbitration agreement fails. It is relevant that Section 11 falls under Part I, Chapter III of the A&C Act that deals with “Composition of arbitral tribunal”. The statutory scheme, along with the clear wording of Section 11(6), evidences that the purpose of this application is for the court to take “necessary measure<\/span>”, in the absence of any other means in the arbitration agreement, “for securing the appointment<\/span>” of the arbitral tribunal. By constituting the arbitral tribunal when there is a deadlock or failure of the parties or the appointed arbitrators to act as per the arbitration agreement, the court only gives effect to the mutual intention of the parties to refer their disputes to arbitration.<\/p>\n

The determination of whether certain persons are parties to the arbitration agreement, and consequently, whether they can be made party to the arbitration proceedings, is left to the arbitral tribunal. While the Section 11 court can return a prima facie finding on this issue, the same does not bind the arbitral tribunal, which must decide the issue based on evidence and the applicable legal principles. The determination of this issue goes to the very root of the arbitral tribunal’s jurisdiction, and hence, is covered under Section 16<\/a> of the A&C Act<\/a>.<\/p>\n

Considering the purpose of a Section 11 application for constitution of an arbitral tribunal and the limited scope of examination into the existence of the arbitration agreement and prima facie finding on who are parties to it, it follows that the Court under Section 11 does not conclusively determine or rule on who can be made party to the arbitral proceedings. Therefore, merely because Respondents 2 and 3 were not parties before the High Court under Section 11, and disputes against them were not referred to the arbitrator, it does not mean that they cannot be impleaded at a later stage on this ground alone.<\/p>\n

Vis-a-vis the source of the arbitral tribunal’s jurisdiction, which is derived from the consent of the parties to refer disputes to arbitration, the Court explained that such consent must be gathered from the arbitration agreement, that must in accordance with Section 7<\/a> of the A&C Act<\/a>. Once a person consents to refer disputes to arbitration, and enters into an arbitration agreement under Section 7, he is bound by the same. The implication of being a party to the arbitration agreement is that such person has contractually undertaken to resolve any disputes referenced in the arbitration agreement through the agreed upon method of dispute resolution, i.e., arbitration. It is under this contractual obligation that a person can be impleaded as a party to the arbitral proceedings, even if he was not served with a Section 21 notice and not referred to arbitration by the court under Section 11.<\/p>\n

Section 16 embodies the doctrine of kompetenz-kompetenz<\/span>, i.e., that the arbitral tribunal can determine its own jurisdiction.<\/span> The provision is inclusive and covers all jurisdictional questions, including the existence and validity of the arbitration agreement, who is a party to the arbitration agreement, and the scope of disputes referrable to arbitration under the agreement. Considering that the arbitral tribunal’s power to make an award that binds the parties is derived from the arbitration agreement, these jurisdictional issues must necessarily be decided through an interpretation of the arbitration agreement itself. Therefore, the arbitral tribunal’s jurisdiction must be determined against the touchstone of the arbitration agreement<\/span>.<\/p>\n

Perusing the facts of the instant case, the Court pointed out that arbitral tribunal’s approach clearly shows that it did not exercise its jurisdiction in accordance with the principle of kompetenz-kompetenz<\/span>, and rather held that such issue does not at all arise at the present stage. Even the High Court, while exercising appellate jurisdiction under Section 37, proceeded on a similar basis. the arbitral tribunal should have inquired into whether Respondents 2 and 3 are parties to the arbitration agreement to determine whether they could have been impleaded in the statement of claim.<\/p>\n

The Court further explained that the Arbitration Clause under the LLP Agreement, is expansive in its wording. It covers disputes arising between the partners inter se each other, and between the partners on the one hand and the LLP and its administrator on the other hand, when such disputes pertain to the LLP Agreement or its construction, or relate to the rights, duties, and liabilities of the partners.<\/p>\n

The Court further pointed out that in view of the fact that Respondents 2 and 3 have, through their conduct, consented to perform contractual obligations under the LLP Agreement, it is clear that they have also agreed to be bound by the arbitration agreement. Since they are parties to the underlying contract and the arbitration agreement, the arbitral tribunal has the power to implead them as parties to the arbitration proceedings while exercising its jurisdiction under Section 16 of the ACA and as per the kompetenz-kompetenz<\/span> principle.<\/p>\n

Hence, the Court allowed the instant appeal and directed Respondents 2 and 3 to be impleaded as parties before the arbitral tribunal, and the proceedings must be continued from the stage of arbitral tribunal’s order dated 15-02-2024.<\/p>\n

<\/p>\n

\n

CASE DETAILS<\/p>\n\n\n\n\n<\/colgroup>\n\n\n
\n

Citation:<\/span>
2025 SCC OnLine SC 806<\/a><\/span><\/p>\n

Appellants :<\/span>
Adavya Projects Pvt Ltd.<\/p>\n

Respondents :<\/span>
Vishal Structurals Pvt Ltd<\/p>\n<\/td>\n

\n

Advocates who appeared in this case<\/p>\n

For Petitioner(s):<\/span>
Mr. Gaurav Agrawal, Sr. Adv. Mr. Debmalya Banerjee, Adv. Ms. Simran Brar, Adv. Mr. Rohan Sharma, Adv. Mr. Kartik Bhatnagar, Adv. Ms. Kiran Devrani, Adv. Ms. Apurva, Adv. Mr. Nitish Dham, Adv. Ms. Liza Vohra, Adv. M\/S. Karanjawala & Co., AOR.<\/p>\n

For Respondent(s):<\/span>
Mr. Susheej Joseph Cyriac, Adv. Mr. Nirnimesh Dube, Adv. Mr. Ankur S. Kulkarni, Adv. Mr. Varun Kanwal, Adv. Mr. Tarun, Adv. M\/S. Lex Regis Law Offices, AOR.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

CORAM :<\/span><\/p>\n

\n
\n

\"P.S.
P.S. Narasimha, J.<\/span><\/a><\/p>\n<\/div>\n

\n

\"Manoj
Manoj Misra, J.<\/span><\/a><\/p>\n<\/div>\n

\n<\/div>\n
<\/div>\n
<\/div>\n
<\/div>\n<\/div>\n<\/div>\n

Buy Arbitration and Conciliation Act, 1996   HERE<\/a><\/h3>\n

\"arbitration<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

“Section 21 does not expressly mandate the claimant to send a notice invoking arbitration to the respondents. However, the provision necessarily mandates such notice, as its receipt by the respondent is required to commence arbitral proceedings”.<\/p>\n","protected":false},"author":3,"featured_media":346273,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,9],"tags":[41950,35672,3226,10111,78741,3686,56660,55022,3659],"class_list":["post-346269","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-supremecourt","tag-arbitral-proceedings","tag-arbitral-tribunal","tag-arbitration","tag-arbitration-agreement","tag-impleading-parties","tag-Jurisdiction","tag-justice-p-s-narasimha","tag-kompetenz-kompetenz","tag-notice"],"yoast_head":"\nSC decision on effect of non-issue of notice under S. 21 of A&C Act<\/title>\n<meta name=\"description\" content=\"Non-issue of notice to certain parties under S. 21 of A&C Act does not strip the Arbitral Tribunal of its jurisdiction to implead: Supreme Court.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2025\/04\/22\/non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Non-issue of notice to certain parties under S. 21 of A&C Act does not strip the Arbitral Tribunal of its jurisdiction to implead: SC\" \/>\n<meta property=\"og:description\" content=\"Non-issue of notice to certain parties under S. 21 of A&C Act does not strip the Arbitral Tribunal of its jurisdiction to implead: Supreme Court.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.scconline.com\/blog\/post\/2025\/04\/22\/non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news\/\" \/>\n<meta property=\"og:site_name\" content=\"SCC Times\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/scc.online\/\" \/>\n<meta property=\"article:published_time\" content=\"2025-04-22T08:30:25+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-04-23T11:19:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/04\/S.-21-AC-Act-notice-arbitral-tribunal-implead.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"533\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sucheta\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Non-issue of notice to certain parties under S. 21 of A&C Act does not strip the Arbitral Tribunal of its jurisdiction to implead: SC\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sucheta\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"9 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/04\\\/22\\\/non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/04\\\/22\\\/non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news\\\/\"},\"author\":{\"name\":\"Sucheta\",\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/#\\\/schema\\\/person\\\/7416b8c43cd3a0a3412cf97fc17b54fa\"},\"headline\":\"Non-issue of notice to certain parties under S. 21 of A&C Act does not strip the Arbitral Tribunal of its jurisdiction to implead: SC\",\"datePublished\":\"2025-04-22T08:30:25+00:00\",\"dateModified\":\"2025-04-23T11:19:07+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/04\\\/22\\\/non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news\\\/\"},\"wordCount\":1833,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/04\\\/22\\\/non-issue-notice-under-s21-acact-arbitral-tribunal-jurisdiction-to-implead-sc-legal-news\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/wp-content\\\/uploads\\\/2025\\\/04\\\/S.-21-AC-Act-notice-arbitral-tribunal-implead.webp\",\"keywords\":[\"Arbitral Proceedings\",\"Arbitral Tribunal\",\"Arbitration\",\"arbitration agreement\",\"Impleading Parties\",\"Jurisdiction\",\"Justice P.S. 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