Supreme Court Holds Arbitration “Commencement” Tied to Recipient’s Receipt of Notice; Restores Ad‑interim Injunction

A bench of Justices Dipankar Datta and Augustine George Masih heard an appeal by Regenta Hotels Private Limited challenging a Karnataka High Court judgment that had dismissed its appeal against the trial court’s refusal to continue interim injunctions and treated arbitration as not having commenced within the 90‑day period under Section 9(2) of the Arbitration and Conciliation Act, 1996.

The Supreme Court allowed the appeal, set aside the High Court judgment and restored the trial court’s ad‑interim injunction dated 17.02.2024. The Court held that “commencement of arbitral proceedings” is governed exclusively by Section 21 of the Act and occurs on the date the respondent received the request invoking arbitration; consequently, the statutory ninety‑day timeline in Section 9(2) must be assessed with reference to that date. The Court further read Rule 9(4) of the Arbitration (Proceedings Before the Courts) Rules, 2001 harmoniously with Section 21, holding that the term “initiated” in Rule 9(4) must be understood as “commenced” within the meaning of Section 21 so as to prevent circumvention of the statutory scheme. The Court observed: “Upon perusal of the binding decisions of this Court and provisions of the Act, there is no doubt left with regard to the correct conceptualization of ‘commencement of arbitral proceedings’ under the Act. The settled position as emerged is that the commencement of arbitral proceedings is a statutory event defined exclusively under Section 21 of the Act, wherein the respondent’s receipt of a request to refer the dispute to arbitration sets the arbitral proceedings in motion and no judicial application i.e. whether under Section 9 or Section 11 petition, constitutes commencement. Therefore, the statutory consequences tied to commencement, including the mandate under Section 9(2) of the Act, must be assessed solely with reference to the date of receipt of request invoking arbitration under Section 21 of the Act.” The Court also noted that “Rule 9(4) ... the interim order shall stand vacated automatically” if arbitral proceedings did not commence within three months, but that consequence could not be invoked where notice had been received within the statutory period.

Background The dispute arose from a Franchise Agreement dated 23.03.2019 between Regenta Hotels Private Limited and M/s Hotel Grand Centre Point (a partnership firm) concerning operation and management of a hotel in Srinagar. Internal family disputes among the partners led to alleged interference by one partner (Respondent No.2) in hotel operations. Regenta filed an application under Section 9 of the Act on 16.02.2024 seeking interim protection and obtained ad‑interim injunctions on 17.02.2024; it also issued an arbitration notice under Clause 19.1 on 11.04.2024. The Trial Court on 01.10.2024 dismissed interim applications for lack of prima facie case and on grounds including absence of documentary proof that Respondent No.2 had consented to the Franchise Agreement. The High Court dismissed Regenta’s appeal, holding that arbitral proceedings had not “commenced” within ninety days as required by Section 9(2) and that Rule 9(4) of the 2001 Rules therefore rendered the interim orders vacated, treating the Section 11 petition dated 28.06.2024 as the relevant commencement date. The High Court, however, accepted that the Franchise Agreement existed — a finding not challenged before the Supreme Court.

The Supreme Court reviewed authoritative precedents including Sundaram Finance, Milkfood Ltd., Geo Miller and Arif Azim and concluded that commencement was a statutory event defined by Section 21: “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.” Applying the principle to the facts, the Court found that Regenta’s notice dated 11.04.2024 and the Respondent’s reply of 23.04.2024 demonstrated receipt within the ninety‑day window from the interim order, so arbitration had commenced in time and the interim injunction remained valid. The Court set aside the High Court judgment and directed the High Court to expeditiously decide the pending Section 11 petition on merits, observing that nothing in the judgment would prejudice the arbitral process. The contempt petition filed by the appellant was disposed of at this stage and there was no order as to costs.

Case Details: Case No.: 2026 INSC 32 Case Title: Regenta Hotels Private Limited v. M/s Hotel Grand Centre Point and Others Appearances: For the Petitioner(s): Not mentioned in the judgment For the Respondent(s): Not mentioned in the judgment