Source: Supreme Court 

Why in News? 

A bench of Justice PS Narsimha and Justice Manoj Misra held that absence of a Section 21 notice to a party does not nullify arbitral jurisdiction if the party is otherwise bound by the arbitration agreement. 

• The Supreme Court held this in the case of Adavya Projects Pvt Ltd v. M/s Vishal Structurals Pvt. Ltd. (2025). 

What was the Background of Adavya Projects Pvt Ltd v. M/s Vishal Structurals Pvt. Ltd. (2025) Case?   

• The appellant and respondent no. 1 entered into an LLP Agreement dated 01st June 2012 to form a Limited Liability Partnership named Vishal Capricorn Energy Services LLP (respondent no. 2). 
• Only the appellant and respondent no. 1 are signatories to the LLP Agreement. 
• Clause 8 of the LLP Agreement designated Mr. Kishore Krishnamoorthy (respondent no. 3) as the Chief Executive Officer of the LLP, responsible for business administration and contract execution. 
• Respondent no. 3 is also a director of respondent no. 1 company. 
• Clause 40 of the LLP Agreement contains an arbitration clause for dispute resolution. 
• Oil India Ltd. awarded a contract to a consortium (including respondent no. 1) on 31st December 2012 for a project in Tenughat, Assam. 
• The consortium sub-contracted the project to respondent no. 1 on 08th January 2013. 
• The appellant and respondent no. 1 entered into a Supplementary Agreement and MoU on 29th January 2013 to execute the project through respondent no. 2 (the LLP). 
• The appellant invested Rs. 1.1 crores for the project execution. 
• Disputes arose in 2018 when the appellant sought to audit the LLP's accounts related to the project. 
• The appellant issued demand notices to respondent no. 1 in 2019 for payment of Rs. 7.31 crores. 
• On 17th November 2020, the appellant invoked arbitration under Clause 40, but only against respondent no. 1. 
• The appellant filed an application under Section 11 of Arbitration and Conciliation Act, 1996 (ACA) for arbitrator appointment, naming only respondent no. 1 as a party. 
• After arbitration commenced, the appellant attempted to implead respondent nos. 2 and 3 in its statement of claim. 
• The issue is whether impleadment as above can be done in the facts of the present case.

What were the Court’s Observations? 

• Section 21- Notice and Joinder in Section 11 Application Not Mandatory: 
  • The service of a Section 21 notice and being a party to a Section 11 application are not prerequisites to implead a person/entity in arbitral proceedings. 
• Purpose of Section 21 Notice: 
  • To fix the commencement date of arbitration (relevant for limitation under Section 43). 
  • To inform the respondent of the claims, allowing them to accept/dispute them. 
  • To help in appointment of arbitrators or raise objections. 
  • To initiate court intervention under Section 11 if appointment procedure fails 
• The primary function of notice under Section 21 is procedural—triggering time-related mechanisms, and not determining jurisdiction. 
• The Court further observed that absence of a Section 21 notice to a party does not nullify arbitral jurisdiction if the party is otherwise bound by the arbitration agreement. 
• With regard to inquiry under Section 16 of ACA: 
  • Under Section 16, the arbitral tribunal has the authority to decide whether it has jurisdiction, including on issues of joinder and party status. 
  • The tribunal must examine whether the person/entity sought to be joined is a party to the arbitration agreement or is bound by it by conduct. 
  • If a person is found to be a party to the arbitration agreement, either expressly or by their conduct, then the tribunal has jurisdiction over them. 
• The Court in the end made the following observations: 
  • Section 21 Notice Is Mandatory but Not Jurisdictional: 
    • While a Section 21 notice is necessary to commence arbitration and for limitation purposes, non-issuance to certain parties does not affect the arbitral tribunal’s jurisdiction to implead them. 
  • Section 11 Application Has Limited Scope: 
    • The court's role under Section 11 is only to appoint arbitrators and conduct a prima facie examination. Its decision does not bind the arbitral tribunal on who may be joined as parties. 
  • Tribunal’s Jurisdiction Depends on the Arbitration Agreement: 
    • The key inquiry under Section 16 is whether the person is a party to the arbitration agreement, either expressly or by conduct, as per Section 7 of the ACA. 
  • Respondents 2 and 3 Are Bound by the Arbitration Agreement: 
    • Despite being non-signatories, their conduct under the LLP Agreement shows they are parties to it and can be validly joined in the arbitral proceedings.

What is Notice under Section 21 of ACA? 

• Section 21 of the ACA provides for commencement of arbitral proceedings. 
• Section 21 provides: 
  • Arbitral proceedings commence on the date the respondent receives the request for arbitration. 
  • The commencement is linked to the specific dispute mentioned in the request. 
  • This rule applies unless the parties have agreed otherwise in their arbitration agreement.