Important points in the judgment
I can’t display the flashcards directly here, but I can summarize the key important paragraphs they cover:
1. Paragraphs 2-3: Issues framed regarding Section 21 notice and Section 11 application as prerequisites for jurisdiction.
2. Paragraphs 8-14: Purpose and scope of Section 21 notice in arbitration.
3. Paragraphs 15-20: Role and limited scope of court in Section 11 applications.
4. Paragraphs 21-26: Source of arbitral tribunal’s jurisdiction and principle of kompetenz-kompetenz under Section 16.
5. Paragraphs 27-28: Arbitral tribunal’s incorrect approach in the present case.
6. Paragraphs 30-33: Review of High Court decisions on related issues.
7. Paragraphs 34-36: Determination of whether respondents 2 and 3 are parties to the arbitration agreement.
Points: Q and A
What is the significance of a notice invoking arbitration under Section 21 of the ACA?
It is mandatory as it fixes the date of commencement of arbitration, which is essential for determining limitation periods and the applicable law.
How does the court view the joinder of parties to arbitration proceedings?
The court acknowledges that non-service of a Section 21 notice does not automatically bar a person from being made a party to arbitration proceedings.
What principle allows an arbitral tribunal to determine its own jurisdiction?
The principle of kompetenz-kompetenz allows an arbitral tribunal to rule on its own jurisdiction, including who is a party to the arbitration agreement.
What must the arbitral tribunal inquire into when determining jurisdiction under Section 16?
The tribunal must examine whether a person/entity is a party to the arbitration agreement.
What was the court’s conclusion regarding respondent nos. 2 and 3’s status in the arbitration agreement?
Respondent nos. 2 and 3 were found to be parties to the arbitration agreement despite being non-signatories.
What did the High Court conclude about the necessity of a Section 21 notice for parties?
The High Court held that the notice is mandatory before a person can be made a party to arbitral proceedings.
What is the role of the court in a Section 11 application regarding arbitration?
The court conducts a limited and prima facie examination of the existence of the arbitration agreement and its parties.
Case Overview
Key Legal Issues
The appeal addresses whether the service of notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 (ACA) and the joinder of a person in the Section 11 application for the appointment of an arbitrator are prerequisites for an arbitral tribunal to exercise jurisdiction.
The court also examines the source of the arbitral tribunal’s jurisdiction and the relevant inquiry under Section 16 of the ACA.
Findings on Jurisdiction
The court concludes that while a Section 21 notice is mandatory for fixing the commencement date of arbitration, non-service of such notice does not preclude a person from being impleaded in arbitral proceedings.
The purpose of a Section 11 application is to appoint an arbitrator, and the court’s limited examination does not restrict the arbitral tribunal’s jurisdiction to include parties later.
Arbitral Tribunal’s Decision
The arbitral tribunal initially ruled that the proceedings against respondents 2 and 3 were not maintainable due to the absence of a Section 21 notice served on them.
The tribunal’s reasoning was that the Hon’ble High Court’s order did not include these respondents, thus limiting the tribunal’s jurisdiction.
High Court’s Ruling
The High Court upheld the arbitral tribunal’s decision, stating that since the Section 21 notice and Section 11 application did not involve respondents 2 and 3, the appellant could not raise disputes against them.
Legal Principles Established
The court emphasizes that the **arbitral tribunal’s jurisdiction** is derived from the consent of the parties as expressed in the arbitration agreement.
The principle of kompetenz-kompetenz allows the tribunal to determine its own jurisdiction, including whether non-signatories can be included based on their conduct .
Conclusion and Directions
The Supreme Court allowed the appeal, ruling that respondents 2 and 3 should be impleaded as parties to the arbitration proceedings.
The court directed the arbitral tribunal to continue proceedings from the stage of its order dated 15.02.2024, emphasizing the need for expeditious resolution.
Page by page
Page 2
Issues Presented: The court outlines the main issues, focusing on whether the service of notice under Section 21 of the Arbitration and Conciliation Act, 1996, and the joinder in the Section 11 application are prerequisites for an arbitral tribunal’s jurisdiction.
Page 3
Mandatory Notice: The court states that while a notice invoking arbitration under Section 21 is mandatory, its non-service does not prevent a person from being impleaded in the arbitration proceedings.
Page 4
Jurisdiction Source: The arbitral tribunal’s jurisdiction is derived from the consent to the arbitration agreement, and the inquiry under Section 16 should focus on whether the person is a party to the agreement.
Page 5
Facts of the Case: The appellant and respondent no. 1 entered into an LLP agreement to form Vishal Capricorn Energy Services LLP. The agreement includes a clause for arbitration in case of disputes.
Page 6
Disputes Arising: Disputes arose in 2018 regarding the accounts of the LLP. The appellant issued a notice invoking arbitration only to respondent no. 1 and filed a Section 11 application for the appointment of an arbitrator.
Page 7
Arbitral Tribunal’s Decision: The arbitral tribunal ruled that proceedings against respondents 2 and 3 were not maintainable due to the absence of a notice invoking arbitration served on them.
Page 8
High Court’s Ruling: The High Court dismissed the appellant’s appeal, affirming that since the Section 21 notice and Section 11 application did not include respondents 2 and 3, they could not be included later.
Page 9
Submissions by Appellant: The appellant’s counsel argued that the arbitral tribunal has the power to implead parties even after reference to arbitration, based on their involvement in the LLP agreement.
Page 10
Respondents’ Counterarguments: The respondents’ counsel contended that the absence of a Section 21 notice and their non-inclusion in the Section 11 application barred their participation in the arbitration.
Page 11
Legal Issues Framed: The court frames two legal questions regarding the prerequisites for impleading a person in arbitration and the source of the tribunal’s jurisdiction.
Page 12
Section 21 Notice Explained: The court explains the purpose of the Section 21 notice, emphasizing its role in determining the commencement of arbitration and the applicable law.
Page 13
Implications of Non-Service: The court notes that non-service of the Section 21 notice does not automatically bar a person from being impleaded in arbitration proceedings.
Page 14
Section 11 Application Purpose: The court discusses the limited scope of the Section 11 application, which is primarily to appoint an arbitrator and does not conclusively determine who can be parties to arbitration.
Page 15
Jurisdictional Inquiry: The court emphasizes that the inquiry into who can be made a party to arbitration is based on whether they are parties to the arbitration agreement.
Page 16
Competence-Competence Principle: The court reiterates that the arbitral tribunal has the authority to determine its own jurisdiction, including the inclusion of non-signatories.
Page 17
High Court Decisions Reviewed: The court reviews various High Court decisions related to the necessity of a Section 21 notice and the implications of non-service on jurisdiction.
Page 18
Cox and Kings Case Reference: The court references the Cox and Kings case, which discusses the conditions under which non-signatories can be considered parties to an arbitration agreement.
Page 19
Factors for Non-Signatories: The court outlines factors to determine if non-signatories are bound by an arbitration agreement, including mutual intent and involvement in the contract.
Page 20
Conclusion on Respondents’ Status: The court concludes that respondents 2 and 3 are bound by the arbitration agreement due to their conduct and roles within the LLP.
Page 21
Final Ruling: The court allows the appeal, reinstating the arbitral tribunal’s jurisdiction over respondents 2 and 3, and directs that they be impleaded in the proceedings.
Page 22
No Costs Ordered: The court concludes with no order as to costs and disposes of any pending applications.
Party
Adavya Projects Pvt. Ltd. vs. M/s Vishal Structurals Pvt. Ltd. & Ors – Civil Appeal No. 5297 of 2025 – 2025 INSC 507, April 17, 2025 – Hon’ble Justices Pamidighantam Sri Narasimha and Manoj Misra.
