# Adavya Projects Pvt. Ltd v. M/s Vishal Structurals Pvt. Ltd. & Ors

- **Citation:** 2025 INSC 507
- **Court:** Supreme Court of India
- **Decided:** 2025-04-17
- **Case number:** Civil Appeal No. 5297 of 2025
- **Bench:** Pamidighantam Sri Narasimha, Manoj Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/adavya-projects-pvt-ltd-v-m-s-vishal-structurals-pvt-ltd-ors-38804
- **Pages:** 32

## Headnote

Whether service of a Section 21 notice and joinder in a Section 11
application are prerequisites to implead a person/entity as a party
to the arbitral proceedings; What is the source of jurisdiction of an
arbitral tribunal over a person/entity who is sought to be impleaded
as a party to the arbitral proceedings; As a corollary, what is the
relevant inquiry that the arbitral tribunal must undertake when
determining its own jurisdiction under Section 16 of the Arbitration
and Conciliation Act, 1996.
Headnotes†
Arbitration and Conciliation Act, 1996 - ss.11, 21 - Service of a
s.21 notice and joinder in a s.11 application, if prerequisites to
implead a person/entity as a party to the arbitral proceedings:
Held: A notice invoking arbitration u/s.21 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 prerequisite to filing an application u/s.11 - However, merely
because such a notice was not issued to certain persons who
are parties to the arbitration agreement does not denude the
arbitral tribunal of its jurisdiction to implead them as parties during
the arbitral proceedings - The purpose of an application u/s.11
is for the court to appoint an arbitrator, so as to enable dispute
resolution through arbitration when the appointment procedure in
the agreement fails - The court only undertakes a limited and prima
facie examination into the existence of the arbitration agreement
and its parties at this stage - Hence, merely because a court does
not refer a certain party to arbitration in its order does not denude
the jurisdiction of the arbitral tribunal from impleading them during
the arbitral proceedings as the referral court's view does not finally
determine this issue. [Para 40(I), 40(II)]
* Author
244
[2025] 5 S.C.R.
Supreme Court Reports
Arbitration and Conciliation Act, 1996 - ss.16, 7 - Source of
the Arbitral Tribunal's jurisdiction and relevant enquiry u/s.16 -
What is the source of jurisdiction of an arbitral tribunal over
a person/entity sought to be impleaded as a party to the
arbitral proceedings - What is the relevant inquiry that the
arbitral tribunal must undertake when determining its own
jurisdiction u/s.16:
Held: The source of the arbitral tribunal's jurisdiction is derived from
the consent of the parties to refer disputes to arbitration - Such
consent must be gathered from the arbitration agreement - Once
a person consents to refer disputes to arbitration, and enters into
an arbitration agreement u/s.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 s.21
notice and not referred to arbitration by the court u/s.11 - The
relevant consideration to determine whether a person can be made
a party before the arbitral tribunal is if such a person is a party to
the arbitration agreement - The arbitral tribunal must determine this
jurisdictional issue in an application u/s.16 by examining whether
a non-signatory is a party to the arbitration agreement as per s.7
of the ACA. [Paras 22, 23, 40(III)]
Arbitration and Conciliation Act, 1996 - s.16 - Appellant and the
respondent no.1-Company entered into an agreement to form
LLP-respondent no.2 - Respondent no.3 was designated as
CEO of the LLP - Respondent nos.2 and 3 were not signatories
to the LLP Agreement that contained the arbitration agreement
in Clause 40 - Whether respondent nos. 2 and 3 are parties
to the arbitration agreement and whether the arbitral tribunal
can implead them as parties to the arbitration proceedings
exercising jurisdiction u/s.16:
Held: Clause 40 of the LLP Agreement is expansive in its

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[2025] 5 S.C.R. 243 : 2025 INSC 507
Adavya Projects Pvt. Ltd.
v.
M/s Vishal Structurals Pvt. Ltd. & Ors.
(Civil Appeal No. 5297 of 2025)
17 April 2025
[Pamidighantam Sri Narasimha* and Manoj Misra, JJ.]
Issue for Consideration
Whether service of a Section 21 notice and joinder in a Section 11
application are prerequisites to implead a person/entity as a party
to the arbitral proceedings; What is the source of jurisdiction of an
arbitral tribunal over a person/entity who is sought to be impleaded
as a party to the arbitral proceedings; As a corollary, what is the
relevant inquiry that the arbitral tribunal must undertake when
determining its own jurisdiction under Section 16 of the Arbitration
and Conciliation Act, 1996.
Headnotes†
Arbitration and Conciliation Act, 1996 - ss.11, 21 - Service of a
s.21 notice and joinder in a s.11 application, if prerequisites to
implead a person/entity as a party to the arbitral proceedings:
Held: A notice invoking arbitration u/s.21 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 prerequisite to filing an application u/s.11 - However, merely
because such a notice was not issued to certain persons who
are parties to the arbitration agreement does not denude the
arbitral tribunal of its jurisdiction to implead them as parties during
the arbitral proceedings - The purpose of an application u/s.11
is for the court to appoint an arbitrator, so as to enable dispute
resolution through arbitration when the appointment procedure in
the agreement fails - The court only undertakes a limited and prima
facie examination into the existence of the arbitration agreement
and its parties at this stage - Hence, merely because a court does
not refer a certain party to arbitration in its order does not denude
the jurisdiction of the arbitral tribunal from impleading them during
the arbitral proceedings as the referral court's view does not finally
determine this issue. [Para 40(I), 40(II)]
* Author
244
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Supreme Court Reports
Arbitration and Conciliation Act, 1996 - ss.16, 7 - Source of
the Arbitral Tribunal's jurisdiction and relevant enquiry u/s.16 -
What is the source of jurisdiction of an arbitral tribunal over
a person/entity sought to be impleaded as a party to the
arbitral proceedings - What is the relevant inquiry that the
arbitral tribunal must undertake when determining its own
jurisdiction u/s.16:
Held: The source of the arbitral tribunal's jurisdiction is derived from
the consent of the parties to refer disputes to arbitration - Such
consent must be gathered from the arbitration agreement - Once
a person consents to refer disputes to arbitration, and enters into
an arbitration agreement u/s.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 s.21
notice and not referred to arbitration by the court u/s.11 - The
relevant consideration to determine whether a person can be made
a party before the arbitral tribunal is if such a person is a party to
the arbitration agreement - The arbitral tribunal must determine this
jurisdictional issue in an application u/s.16 by examining whether
a non-signatory is a party to the arbitration agreement as per s.7
of the ACA. [Paras 22, 23, 40(III)]
Arbitration and Conciliation Act, 1996 - s.16 - Appellant and the
respondent no.1-Company entered into an agreement to form
LLP-respondent no.2 - Respondent no.3 was designated as
CEO of the LLP - Respondent nos.2 and 3 were not signatories
to the LLP Agreement that contained the arbitration agreement
in Clause 40 - Whether respondent nos. 2 and 3 are parties
to the arbitration agreement and whether the arbitral tribunal
can implead them as parties to the arbitration proceedings
exercising jurisdiction u/s.16:
Held: Clause 40 of the LLP Agreement is expansive in its wording -
The arbitration agreement covers the present disputes arising out
of reconciliation of accounts in relation to the ITF Project, as this
directly affects the rights and liabilities of the partners, the appellant
and respondent no.1- Arbitration agreement itself includes within its
[2025] 5 S.C.R.
245
Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors.
scope disputes that may arise between the partners and the LLPrespondent no. 2, and the partners and the administrators of the
LLP-respondent no. 3 as he is the CEO of the LLP and responsible
for its administration under the LLP Agreement - Furthermore,
Respondent no.2 was created under the LLP Agreement and the
scope of its activities and the management of its business are set
out in the LLP Agreement - It is pursuant to the objectives, purpose,
and terms of the LLP Agreement that respondent no.2 undertook
the ITF Project, for which a Supplementary LLP Agreement and
an MoU were also signed by the partners - Respondent no. 2
was carrying out its business and entering into contracts and
dealings with third parties, such as undertaking the ITF Project,
based on the terms of the LLP Agreement - Thus, by way of
its conduct, respondent no. 2 has undertaken to be bound by
the LLP Agreement and it is therefore bound by the arbitration
clause contained therein - Respondent no. 3, who is the CEO
of the LLP and is responsible for its administration and looking
after its business derives his position and duties from Clause 8 of
the LLP Agreement - Therefore, respondent no.3 is also bound
by the arbitration clause contained in the LLP Agreement, not in
his individual capacity but as the CEO of the LLP - Respondent
nos.2 and 3, through their conduct, have consented to perform
contractual obligations under the LLP Agreement, hence they have
also agreed to be bound by the arbitration agreement contained
in Clause 40 therein - 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 u/s.16 and as per the kompetenzkompetenz principle i.e., the arbitral tribunal can determine its own
jurisdiction. [Paras 37-39]
Arbitration and Conciliation Act, 1996 - s.16 - Doctrine of
kompetenz-kompetenz - Discussed. [Paras 24-26]
Arbitration and Conciliation Act, 1996 - ss.21, 11, 16 - Appellant
and the respondent no.1 entered into a contract to form LLPrespondent no. 2 - Respondent no.3 was designated as CEO
of LLP - Disputes arose - Appellant issued notice u/s.21 for
invocation of arbitration to respondent no.1 only - Further, in
s.11 application also only the respondent no.1 was impleaded
as a party - However, in statement of claims, the appellant
impleaded the respondent no.2 and 3 - Application u/s.16 filed
246
[2025] 5 S.C.R.
Supreme Court Reports
by respondent nos.1-3 raising objection that the arbitration was
not maintainable against respondent nos.2 and 3 as they were
neither sent the notice invoking arbitration u/s.21 nor were
parties in the s.11 application for appointment of arbitrator -
Arbitral Tribunal allowed the application u/s.16 - High Court
dismissed the appeal thereagainst - Correctness:
Held: While allowing the s.16 application, the arbitral tribunal
proceeded only on the basis that respondent nos. 2 and 3 were
not served with the s.21 notice and were not parties in the s.11
application - It did not go into whether these respondents were
parties to the arbitration agreement, and whether its jurisdiction
extends to them - Arbitral tribunal did not exercise its jurisdiction
in accordance with the principle of kompetenz-kompetenz and
rather held that such issue does not at all arise at the present
stage - Even the High Court, while exercising appellate jurisdiction
u/s.37 proceeded on a similar basis - This was an incorrect
approach - Rather, the arbitral tribunal should have inquired into
whether respondent nos. 2 and 3 are parties to the arbitration
agreement to determine whether they could have been impleaded
in the statement of claim - Not being served with a s.21 notice and
not being made a party in the s.11 application are not sufficient
grounds to hold that a person cannot be made party to arbitral
proceedings - Impugned judgment set aside - Respondent nos. 2
and 3 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. [Paras 21, 27, 28, 41]
Arbitration and Conciliation Act, 1996 - s.21 - Notice under -
Purpose and Object - Discussed. [Paras 10.1-10.3, 30.2]
Case Law Cited
Cox and Kings Ltd. v. SAP India (P) Ltd. [2023] 15 SCR 621 :
(2024) 4 SCC 1 - followed.
State of Goa v. Praveen Enterprises [2011] 10 SCR 1026 : (2012)
12 SCC 581 - relied on.
Milkfood Ltd. v. GMC Ice Cream (P) Ltd. [2004] 3 SCR 854 : (2004)
7 SCC 288; Geo-Miller & Co (P) Ltd. v. Chairman, Rajasthan
Vidyut Utpadan Nigam Ltd [2019] 11 SCR 1108 : (2020) 14 SCC
643; BCCI v. Kochi Cricket (P) Ltd. [2018] 2 SCR 829 : (2018) 6
SCC 287; BSNL v. Nortel Networks (India) (P) Ltd. [2021] 2 SCR
[2025] 5 S.C.R.
247
Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors.
644 : (2021) 5 SCC 738; SBI General Insurance Co. Ltd. v. Krish
Spinning 2024 SCC OnLine SC 1754; Ajay Madhusudan Patel v.
Jyotrindra S. Patel [2024] 9 SCR 894 : (2025) 2 SCC 147; Bharat
Petroleum Corporation Ltd. v. Go Airlines (India) Ltd. [2019] 13
SCR 1044 : (2019) 10 SCC 250; Govind Rubber Ltd. v. Louids
Dreyfus Commodities Asia (P) Ltd. [2014] 12 SCR 488 : (2015)
13 SCC 477; ONGC Ltd. v. Afcons Gunanusa JV [2022] 10 SCR
660 : (2024) 4 SCC 481; Uttarakhand Purv Sainik Kalyan Nigam
Ltd. v. Northern Coal Field Ltd. [2019] 14 SCR 999 : (2020) 2
SCC 455 - referred to.
Alupro Building Systems Pvt Ltd. v. Ozone Overseas Pvt Ltd., 2017
SCC OnLine Del 7228; De Lage Landen Financial Services India
(P) Ltd. v. Parhit Diagnostic (P) Limited, 2021 SCC OnLine Del
4160; Arupri Logistics (P) Ltd. v. Vilas Gupta, 2023 SCC OnLine
Del 4297; Cardinal Energy & Infra Structure (P) Ltd. v. Subramanya
Construction & Development Co. Ltd., 2024 SCC OnLine Bom
964; ONGC Ltd. v. Discovery Enterprises (P) Ltd. [2022] 4 SCR
926 : (2022) 8 SCC 42 - clarified.
Books and Periodicals Cited
Gary Born, International Commercial Arbitration, vol 2 (3rd edn,
Kluwer Law International 2021) 2777; Redfern and Hunter on
International Arbitration (5th edn, Oxford University Press 2009);
David St John Sutton, Judith Gill and Matthew Gearing, Russell
on Arbitration (23rd edn, Sweet and Maxwell 2009) - referred to.
List of Acts
Arbitration and Conciliation Act, 1996; Limitation Act, 1963; Arbitration
Act, 1940; Foreign Awards (Recognition and Enforcement) Act,
1961.
List of Keywords
Section 21, 11 of the Arbitration and Conciliation Act, 1996; Notice
under Section 21, Arbitration and Conciliation Act, 1996 not
served; Notice invoking arbitration; Not a party in the Section 11
application; Purpose of an application under Section 11, Arbitration
and Conciliation Act, 1996; Appointment of arbitrator; Arbitral
tribunal's jurisdiction; Implead non-signatories; Non-service of
notice; Kompetenz-kompetenz principle; Arbitral proceedings; LLP
agreement; Arbitration agreement; Oil and gas sector projects; ITF
248
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Supreme Court Reports
projects; Principles of natural justice; Limitation period; Appointment
procedure; Notice raising counter-claims; Section 7 Arbitration
and Conciliation Act, 1996; Arbitration clause; Reconciliation of
accounts; Contractual obligation; Dispute resolution; International
commercial arbitration; Joinder of parties; Claims are time-barred,
barred by law, or untenable; Objections regarding limitation and
maintainability; Source of jurisdiction of an arbitral tribunal.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5297 of 2025
From the Judgment and Order dated 08.07.2024 of the High Court
of Delhi at New Delhi in ARB.A.(COMM.) No. 24 of 2024
Appearances for Parties
Advs. for the Appellant:
Gaurav Agrawal, Sr. Adv., Debmalya Banerjee, Ms. Simran Brar,
Ms. Kiran Devrani, Nitish Dham, Ms. Apurva, Ms. Liza Vohra,
M/S. Karanjawala & Co..
Advs. for the Respondents:
Susheel Joseph Cyriac, Nirnimesh Dube, Ankur S. Kulkarni, Varun
Kanwal, M/S. Lex Regis Law Offices.
Judgment / Order of the Supreme Court
Judgment
Pamidighantam Sri Narasimha, J.
Contents*
Facts ...........................................................................................
3
Arbitral Tribunal's Decision on the Section 16 Application ........
7
Impugned Order .........................................................................
7
Submissions ...............................................................................
8
* * Ed. Note: Pagination as per the original Judgment.
[2025] 5 S.C.R.
249
Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors.
Issues ......................................................................................... 10
Notice Invoking Arbitration under Section 21 of the ACA .......... 10
Appointment of Arbitrator by the Court under Section 11 .......... 15
Source of the Arbitral Tribunal's Jurisdiction and Relevant
Inquiry under Section 16 ............................................................ 20
Returning to the Facts of the Case ...........................................
24
High Court Decisions on these Issues ......................................
26
Whether Respondent Nos. 2 and 3 are Parties to the
Arbitration Agreement ................................................................
32
Summary of Conclusions ........................................................... 38
1.
Leave granted.
2.
The issues arising in the present appeal are whether the service of
notice invoking arbitration under Section 21 of the Arbitration and
Conciliation Act, 19961 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. In the present case, 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, the High Court has affirmed and upheld this reasoning in
exercise of its appellate jurisdiction under Section 37, from which
the present appeal arises. Upon consideration of the purpose and
scope of a Section 21 notice and Section 11 application, as well as
the source of the arbitral tribunal's jurisdiction being the arbitration
agreement and the principle of kompetenz-kompetenz under Section
16 of the ACA, we have allowed the present appeal by answering
1
Hereinafter "the ACA".
250
[2025] 5 S.C.R.
Supreme Court Reports
the issues as follows: First, while a notice invoking arbitration under
Section 21 is mandatory and fulfils various purposes by fixing the
date of commencement of arbitral proceedings, non-service of such
notice on a person does not preclude his impleadment in the arbitral
proceedings. Second, the purpose of an application under Section 11
is simply the constitution of the arbitral tribunal, which is pursuant
to a limited and prima facie examination by the referral court. The
order appointing the arbitrator does not limit the arbitral tribunal's
terms of reference or scope of jurisdiction. Third, the arbitral tribunal's
jurisdiction over a person/entity is derived from their consent to the
arbitration agreement. Hence, the proper inquiry in an application
under Section 16 is whether such person is a party to the arbitration
agreement. Fourth, in the facts of the present case, an arbitration
agreement exists between the appellant and respondent nos. 2
and 3, and hence they can be impleaded as parties to the arbitral
proceedings.
3.
Facts: The facts that are relevant for our purpose are as follows. The
appellant and respondent no. 1 entered into an agreement dated
01.06.2012 to form a Limited Liability Partnership2 by the name of
Vishal Capricorn Energy Services LLP, which is respondent no. 2
herein, to carry out various oil and gas sector projects. It is relevant
to note at this stage that only the appellant and respondent no. 1 are
signatories to the LLP Agreement. Clause 8 of the LLP Agreement
provides that Mr. Kishore Krishnamoorthy, who is respondent no. 3
herein, shall be designated as the Chief Executive Officer of the LLP
and will be responsible for administration of business and looking
after the execution of contracts. It is relevant that respondent no. 3
is also a director of respondent no. 1 company. Further, Clause 40 of
the LLP Agreement provides for dispute resolution through arbitration
in the following terms:
"40. Disputes or differences, if any, that may arise between
partners inter se and/ or between the partner(s) and LLP
hereto or their affiliates, assigns, successors, attorneys,
administrators and all those claiming through it touching
these presents or the construction thereof or any clause or
2
Hereinafter "LLP".
[2025] 5 S.C.R.
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Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors.
thing herein contained or otherwise or in any way relating
to or concerning these presents or the rights, duties or
liabilities of any of the partners hereto in connection
therewith the matters in such dispute or difference shall be
referred to the arbitration in accordance with and subject
to the provisions of Arbitration and Conciliation Act, 1996
or to any statutory modification or reenactment thereof
for the time being in force. The venue of the Arbitration
shall be decided by the Arbitrator so appointed by mutual
consent of both partners."
3.1 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 no. 1 was a
member. By agreement dated 08.01.2013, the consortium subcontracted the ITF Project to respondent no. 1. Pursuantly, the
appellant and respondent no. 1 entered into a Supplementary
Agreement and a Memorandum of Understanding3, both dated
29.01.2013, for execution of the ITF Project through respondent
no. 2. The appellant infused funds of Rs. 1.1 crores for the
execution of this Project.
3.2 Disputes arose in 2018 when the appellant sought documents
and information to audit respondent no. 2's accounts in relation
to the ITF Project. The appellant then issued demand notices
dated 11.10.2019 and 20.12.2019 to respondent no. 1 for
payment of Rs. 7.31 crores towards reconciliation of accounts
of the LLP. Subsequently, on 17.11.2020, the appellant issued
a notice invoking arbitration under Clause 40 of the LLP
Agreement. It is relevant that this notice was issued only to
respondent no. 1 through its Director, respondent no. 3. The
appellant then filed a Section 11 application for appointment of
arbitrator, impleading only respondent no. 1 as a party. The High
Court, by order dated 24.11.2021, appointed a sole arbitrator "to
adjudicate the disputes that are stated to have arisen between
the parties out of the LLP Agreement dated 01st June, 2012
read with Supplementary LLP Agreement and MoU both dated
29th January, 2013."
3
Hereinafter "MoU".
252
[2025] 5 S.C.R.
Supreme Court Reports
3.3 After the arbitrator entered reference, the appellant filed its
statement of claim, wherein it also impleaded respondent nos.
2 and 3 as parties to the arbitration. However, at the time of
filing, the prayer clause was restricted to respondent no. 1.
Respondent nos. 1-3 then filed an application under Section 16
of the ACA, raising various objections to the arbitral tribunal's
jurisdiction. The most relevant objection for our purpose is that
the arbitration is not maintainable against respondent nos. 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. Further, it was contended that the arbitration
agreement contained in Clause 40 of the LLP Agreement does
not bind respondent no. 2, which is itself a creature of the LLP
Agreement, and respondent no. 3 as he was not a party to the
LLP Agreement in his individual capacity.
3.4 In the meanwhile, the appellant preferred an application under
Section 23(3) of the ACA 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 respondent nos. 2 and 3
as well. The appellant's application for amendment was allowed
by the arbitral tribunal's order dated 01.08.2023 on the ground
that these are ministerial amendments that do not change the
averments in the original statement of claim.
4.
Arbitral Tribunal's Decision on the Section 16 Application: By order
dated 15.02.2024, the arbitral tribunal allowed the application under
Section 16 and held that the arbitral proceedings against respondent
nos. 2 and 3 are not maintainable. The reasoning of the arbitral tribunal
is that in the absence of the notice invoking arbitration being served
on respondent nos. 2 and 3, as well as considering that the High
Court did not refer them to arbitration while allowing the Section 11
application, the arbitral tribunal cannot exercise jurisdiction over them.
The arbitral tribunal also rejected the appellant's argument regarding
its own competence to implead non-signatories as necessary parties
by holding that there is no finding that respondent nos. 2 and 3 are
essential for effective adjudication of disputes.
5.
Impugned Order: The appellant's appeal under Section 37(2)(a) of
the ACA against the arbitral tribunal's order was dismissed by the
High Court's order dated 08.07.2024, which is impugned herein. The
[2025] 5 S.C.R.
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Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors.
High Court proceeded on a similar basis and held that since the
Section 21 notice and the Section 11 application do not raise any
disputes against respondent nos. 2 and 3, and they are not included
as parties therein, the appellant cannot be permitted to subsequently
raise disputes against them in the statement of claim.
6.
Submissions: We have heard Mr. Gaurav Agrawal, learned senior
counsel for the appellant and Mr. Varun Kanwal, learned counsel
for the respondents.
6.1 Mr. Agrawal has submitted that: First, as per the principle of
kompetenz-kompetenz enshrined in Section 16 of the ACA, the
arbitral tribunal has the power to implead parties (signatories
or non-signatories) even after reference to arbitration if the
disputes involving them arise from the same agreement.4 In the
present facts, respondent nos. 2 and 3 ought to be impleaded for
complete adjudication of disputes, considering their intentional
and consensual involvement in the performance of the LLP
Agreement, Supplementary Agreement, and MoU as well as
execution of the ITF Project. Second, they are bound by the
arbitration agreement in Clause 40 of the LLP Agreement as
it specifically refers to disputes between the partners and the
LLP (respondent no. 2), and the partners and the administrator
(respondent no. 3). Further, even Section 23(4) of the Limited
Liability Partnership Act, 2008 read with Schedule I provides for
arbitration between the LLP and its partners. Third, given the
intertwined roles of the respondents, the absence of a separate
notice under Section 21 being issued to them does not bar the
appellant from impleading them in the arbitral claim as they
had constructive notice through respondent no. 1 upon whom
such notice was served.
6.2 Mr. Kanwal, on the other hand, has submitted that the issue for
consideration is not the arbitral tribunal's jurisdiction to implead
a non-signatory. Rather, it is whether a person/entity that has
not been served with a notice under Section 21, and has not
been referred to arbitration by the court under Section 11 of
the ACA, can be made a party to the arbitral proceedings. His
4
Relied on Cox and Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1.
254
[2025] 5 S.C.R.
Supreme Court Reports
submissions are as follows: First, this Court's decision in Cox
and Kings (supra) is not applicable to the facts of the case, and
has rightly been distinguished as neither the arbitral tribunal nor
the High Court have found that respondent nos. 2 and 3 are
necessary parties for effective adjudication of disputes. Second,
that respondent nos. 2 and 3 are not bound by the arbitration
agreement as they are not parties to the same. Third, that the
proceedings against respondent nos. 2 and 3 are contrary to
principles of natural justice as they were not served with any
notice or impleaded in the Section 11 application.
7.
Issues: Given the factual background and submissions of the parties,
there are two questions of law that can be framed for our consideration:
I.
Whether service of a Section 21 notice and joinder in
a Section 11 application are prerequisites to implead a
person/entity as a party to the arbitral proceedings?
II.
What is the source of jurisdiction of an arbitral tribunal
over a person/entity who is sought to be impleaded as a
party to the arbitral proceedings? As a corollary, what is
the relevant inquiry that the arbitral tribunal must undertake
when determining its own jurisdiction under Section 16 of
the ACA?
7.1 After analysing and answering these legal issues, we will
examine the facts and the material on record in the present
case to determine whether respondent nos. 2 and 3 can be
made parties to the arbitral proceedings.
8.
Notice Invoking Arbitration under Section 21 of the ACA: Section 21
falls under Part I, Chapter V of the ACA, which deals with "Conduct
of arbitral proceedings". The provision is extracted hereinbelow for
reference:
"21. Commencement of arbitral proceedings.-Unless
otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute commence on the date on
which a request for that dispute to be referred to arbitration
is received by the respondent."
9.
A plain reading of the provision shows that in the absence of an
agreement between the parties, arbitral proceedings are deemed to
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have commenced when the respondent receives a request to refer
disputes to arbitration. It is clear that 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, unless the parties have mutually agreed on
another date/event for determining when the arbitral proceedings
have commenced.
10. This Court has expounded the purpose and object underlying the
notice referenced in Section 21 in several judgments, which can be
stated as follows:
10.1 First, the notice is necessary to determine whether claims
are within the period of limitation or are time-barred. Section
43(1) of the ACA stipulates that the Limitation Act, 1963 shall
apply to arbitrations as it applies to court proceedings. Further,
Section 43(2) provides that for the purpose of the Limitation
Act, an arbitration shall be deemed to have commenced on
the date referred to in Section 21. Hence, the date of receipt of
the Section 21 notice is used to determine whether a dispute
has been raised within the limitation period as specified in
the Schedule to the Limitation Act, as held by this Court in
Milkfood Ltd. v. GMC Ice Cream (P) Ltd.5 and State of Goa
v. Praveen Enterprises.6
10.2 Second, the date of receipt of notice is also relevant to determine
the applicable law to the arbitral proceedings. This can be
understood in two senses: (i) When the arbitral proceedings
are governed by a law that is different from the proper law of
the contract, the governing law applies only after the arbitral
proceedings have commenced, as held in Milkfood Ltd (supra).7
And, (ii) Section 85(2)(a) of the ACA provides that the Arbitration
Act, 1940 and Foreign Awards (Recognition and Enforcement)
Act, 1961 will apply to arbitral proceedings that commenced
prior to the ACA coming into force, unless otherwise agreed by
the parties. Hence, the date of invoking arbitration is necessary
5
(2004) 7 SCC 288, paras 26, 29
6
(2012) 12 SCC 581, paras 16, 18.
7
Milkfood Ltd (supra), para 31.
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to determine which arbitration law applies to the proceedings
as per the decisions in Milkfood Ltd (supra)8 and Geo-Miller
& Co (P) Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam
Ltd.9 Similarly, the applicability of amendments to the ACA to
arbitral proceedings is determined by reference to the date
on which such proceedings commenced as per Section 21.10
10.3 Third, an application before the High Court or this Court under
Section 11(6) of the ACA for appointment of arbitrator can be
filed only after the respondent has failed to act as per the
appointment procedure in the arbitration agreement. Hence,
invocation of arbitration as provided in Section 21, and the
subsequent failure of the respondent to appoint its arbitrator
or agree to the appointment of a sole arbitrator as provided in
Sections 11(4) and 11(5), are necessary for invoking the court's
jurisdiction under Section 11. This is as per the decision of this
Court in BSNL v. Nortel Networks (India) (P) Ltd.11 Further, the
limitation period within which the Section 11 application must be
filed is also calculated with reference to the date on which the
appointment procedure under the arbitration agreement fails.12
11. It is clear that 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.
12. In this case, a Section 21 notice was undisputedly issued by the
appellant under Clause 40 of the LLP Agreement on 17.11.2020;
but the problem arises because this notice was issued only to
respondent no. 1. However, there is nothing in the wording of the
provision or the scheme of the ACA to indicate that merely because
such notice was not served on respondent nos. 2 and 3, they cannot
8
ibid, paras 46, 49, 70.
9
(2020) 14 SCC 643, para 10.
10
For example, the applicability of the Arbitration and Conciliation (Amendment) Act, 2015 to arbitral
proceedings depends on whether the notice invoking arbitration was issued before or after the
amendment came into force. See BCCI v. Kochi Cricket (P) Ltd., (2018) 6 SCC 287, paras 38-39.
11
(2021) 5 SCC 738, para 15.
12
ibid, para 16.
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Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors.
be impleaded as parties to the arbitral proceedings. The relevant
considerations for joining them as parties to the arbitration will be
discussed at a later stage.
13. At this point, it is important to note this Court's decision in State of
Goa v. Praveen Enterprises (supra) wherein it was held that the claims
and disputes raised in the notice under Section 21 do not restrict
and limit the claims that can be raised before the arbitral tribunal.
The consequence of not raising a claim in the notice is only that
the limitation period for such claim that is raised before the arbitral
tribunal for the first time will be calculated differently vis-a-vis claims
raised in the notice. However, non-inclusion of certain disputes in
the Section 21 notice does not preclude a claimant from raising
them during the arbitration, as long as they are covered under the
arbitration agreement. Further, merely because a respondent did not
issue a notice raising counter-claims, he is not precluded from raising
the same before the arbitral tribunal, as long as such counter-claims
fall within the scope of the arbitration agreement.13
14. A similar rationale may be adopted in this case as well, especially
considering the clear purpose served by a Section 21 notice.
Extending this logic, non-service of the notice under Section 21 and
the absence of disputes being raised against respondent nos. 2 and
3 in the appellant's notice dated 17.11.2020 do not automatically bar
their impleadment as parties to the arbitration proceedings.
15. Appointment of Arbitrator by the Court under Section 11: The other
reason provided by the arbitral tribunal and the High Court in this
case is that respondent nos. 2 and 3 were not made parties in the
appellant's Section 11 application. Consequently, the High Court order
appointing the arbitrator only refers the appellant and respondent
no. 1 to arbitration, and the arbitration is maintainable only qua both
of them. We find that this line of reasoning must also be rejected
in light of the purpose of a Section 11 application and the scope of
inquiry by the courts while deciding such application. The relevant
portion of Section 11 reads as follows:
"11. Appointment of arbitrators.-
(6) Where, under an appointment procedure agreed upon
by the parties,-
13
Praveen Enterprises (supra), paras 19-20, 26.
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(a) a party fails to act as required under that
procedure; or
(b) the parties, or the two appointed arbitrators, fail
to reach an agreement expected of them under that
procedure; or
(c) a person, including an institution, fails to perform
any function entrusted to him or it under that procedure,
a party may request [the Supreme Court or, as the case may
be, the High Court or any person or institution designated
by such Court] to take the necessary measure, unless the
agreement on the appointment procedure provides other
means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the
High Court, while considering any application under subsection (4) or sub-section (5) or sub-section (6), shall,
notwithstanding any judgment, decree or order of any
Court, confine to the examination of the existence of an
arbitration agreement."
16. As has been stated above, a 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 ACA 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", in the absence of any other means
in the arbitration agreement, "for securing the appointment" 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.14
17. It is also relevant to note that while deciding such an application
under Section 11(6), the High Court or this Court, as the case may
be, undertakes a limited examination as per Section 11(6A). The
14
Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 & Stamp Act,
1899, In re, (2024) 6 SCC 1, para 150; SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC
OnLine SC 1754, para 122.
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court's jurisdiction is confined to a prima facie examination, without
conducting a mini-trial or laborious and contested inquiry, into the
existence of the arbitration agreement, i.e., whether there exists a
contract to refer disputes that have arisen between the parties to
arbitration.15 Further, any examination into the validity of the arbitration
agreement must be restricted to the requirement of "formal validity",
i.e., whether the requirements of a written agreement under Section
7 of the ACA are satisfied.16 Beyond this, the court must leave it to
the arbitral tribunal to "rule" on and adjudicate the existence and
validity of the arbitration agreement on the basis of evidence adduced
by the parties, in accordance with the principle under Section 16 of
the ACA.17
18. More specifically, in respect of determining parties to the arbitral
proceedings, the Constitution Bench in Cox and Kings (supra)
delineated the role of the court in a Section 11 application in the
context of non-signatories as parties to the arbitration agreement
as follows:
"169. In case of joinder of non-signatory parties to an
arbitration agreement, the following two scenarios will
prominently emerge : first, where a signatory party to an
arbitration agreement seeks joinder of a non-signatory
party to the arbitration agreement; and second, where a
non-signatory party itself seeks invocation of an arbitration
agreement. In both the scenarios, the referral court will
be required to prima facie rule on the existence of the
arbitration agreement and whether the non-signatory is
a veritable party to the arbitration agreement. In view
of the complexity of such a determination, the referral
court should leave it for the Arbitral Tribunal to decide
whether the non-signatory party is indeed a party to the
arbitration agreement on the basis of the factual evidence
and application of legal doctrine. The Tribunal can delve
into the factual, circumstantial, and legal aspects of the
matter to decide whether its jurisdiction extends to the
15
In re, Interplay (supra), paras 164-167.
16
ibid, para 165; SBI General Insurance (supra), para 110.
17
In re, Interplay (supra), para 167, 169; SBI General Insurance (supra), para 111.
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non-signatory party. In the process, the Tribunal should
comply with the requirements of principles of natural justice
such as giving opportunity to the non-signatory to raise
objections with regard to the jurisdiction of the Arbitral
Tribunal. This interpretation also gives true effect to the
doctrine of competence-competence by leaving the issue
of determination of true parties to an arbitration agreement
to be decided by the Arbitral Tribunal under Section 16."
(emphasis supplied)
Therefore, 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.