Supreme Court Allows Impleadment Of Non‑Signatories In Arbitration Despite Non‑Service Of Section 21 Notice
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A bench of Justices Pamidighantam Sri Narasimha and Manoj Misra heard an appeal by Adavya Projects Pvt. Ltd. against a Delhi High Court order which had affirmed an arbitral tribunal’s finding that arbitration could not proceed against two entities because they were not served with a notice under Section 21 of the Arbitration and Conciliation Act, 1996 and were not impleaded in the Section 11 application for appointment of an arbitrator.
The Court allowed the appeal and held that while a notice invoking arbitration under Section 21 was mandatory for fixing the date of commencement of proceedings and for certain time‑related consequences, non‑service of that notice on a person did not preclude the arbitral tribunal from impleading him. The Court emphasised that the purpose of a Section 11 application was confined to constitution of the tribunal by a limited prima facie examination and did not finally determine who fell within the tribunal’s jurisdiction. The Court reiterated the doctrine of kompetenz‑kompetenz under Section 16 and held that the real inquiry is whether the person sought to be impleaded had consented to the arbitration agreement — i.e., whether he was a party to the arbitration agreement. The Court, in its reasoning, observed: “40. Summary of Conclusions: Our legal analysis of the issues that we set out above, as well as our findings in the facts of the given appeal, can be stated as follows:
I. A notice invoking arbitration under Section 21 of the ACA 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 under Section 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.
II. The purpose of an application under Section 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.
III. 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 under Section 16 by examining whether a non‑signatory is a party to the arbitration agreement as per Section 7 of the ACA.
IV. In the facts of the present appeal, respondent nos. 2 and 3 are parties to the arbitration agreement in Clause 40 of the LLP Agreement despite being non‑signatories. Their conduct is in accordance with and in pursuance of the terms of the LLP Agreement, and hence, they can be made parties to the arbitral proceedings.”
Background The dispute arose from an LLP Agreement dated 01.06.2012 between the appellant and respondent No.1, which contained an expansive arbitration clause (Clause 40) covering disputes inter se partners and between partners and the LLP. An LLP (respondent No.2) was formed pursuant to that agreement and respondent No.3 served as its CEO. After payments and accounting disputes in relation to an ITF project, the appellant served a notice invoking arbitration on 17.11.2020 — but only on respondent No.1 through its director (respondent No.3). The appellant moved under Section 11 for appointment of an arbitrator impleading only respondent No.1; the Delhi High Court appointed a sole arbitrator on 24.11.2021. The appellant later filed its statement of claim and impleaded respondent Nos.2 and 3; those respondents raised a Section 16 challenge, contending they had not been served with the Section 21 notice and had not been referred by the Section 11 order. The arbitral tribunal allowed the Section 16 challenge and struck out proceedings against them, holding that “the absence of any reference qua them by the High Court under Section 11 … renders these proceedings against them void‑ab‑initio.” The High Court dismissed the appellant’s appeal under Section 37 and affirmed the tribunal. On further appeal, the Supreme Court examined the functions of Section 21 (fixing commencement, limitation and applicable law), the limited prima facie role of courts under Section 11(6A), and the kompetenz‑kompetenz principle under Section 16. The Court followed and applied precedents including Cox & Kings and ONGC/Discovery Enterprises principles on non‑signatories, and concluded that respondent Nos.2 and 3 — by virtue of their creation, roles and conduct under the LLP Agreement and ancillary documents — were bound by the arbitration clause and could be impleaded. The Supreme Court set aside the High Court order, directed impleadment of respondent Nos.2 and 3, and remitted the matter to the arbitral tribunal to continue proceedings from the stage after its order dated 15.02.2024, with a request to complete hearings and pass award expeditiously; no order as to costs was made.
Case No.: 2025 INSC 507; Civil Appeal No. 5297 of 2025 arising out of SLP (C) No. 25746 of 2024 Case Title: Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors. Appearances: For the Petitioner(s): Mr. Gaurav Agrawal, Senior Counsel (for appellant) For the Respondent(s): Mr. Varun Kanwal, Advocate (for respondents)
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