Supreme Court of India

Adavya Projects Pvt. Ltd vs M/S Vishal Structurals Pvt. Ltd on 17 April, 2025

Author:
Pamidighantam Sri Narasimha

Bench:
Pamidighantam Sri Narasimha

2025 INSC 507 REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5297 OF 2025
ARISING OUT OF SLP (C) No. 25746 OF 2024

ADAVYA PROJECTS PVT. LTD. ...APPELLANT(S)

VERSUS

M/S VISHAL STRUCTURALS PVT. LTD. & ORS. …RESPONDENT(S)

JUDGMENT

PAMIDIGHANTAM SRI NARASIMHA, J.

Contents
Facts .................................................................................................................. 3

Arbitral Tribunal’s Decision on the Section 16 Application ................................ 7

Impugned Order ................................................................................................ 7

Submissions ...................................................................................................... 8

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

Signature Not Verified

Digitally signed by

KAPIL TANDON

Date: 2025.04.17

Whether Respondent Nos. 2 and 3 are Parties to the Arbitration Agreement..32
18:07:26 IST
Reason:

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 the issues as
Hereinafter “the ACA”.
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

Partnership 2 by the name of Vishal Capricorn Energy Services LLP,
Hereinafter “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 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 sub-contracted
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
Hereinafter “MoU”.
Agreement dated 01st June, 2012 read with Supplementary LLP

Agreement and MoU both dated 29th January, 2013.”

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 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
Relied on
Cox and Kings Ltd. v. SAP India (P) Ltd.
, (2024) 4 SCC 1.
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

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 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
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,
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 to determine

which arbitration law applies to the proceedings as per the
(2004) 7 SCC 288, paras 26, 29
(2012) 12 SCC 581, paras 16, 18.
Milkfood Ltd
(supra), para 31.
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
ibid, paras 46, 49, 70.
(2020) 14 SCC 643, para 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.
(2021) 5 SCC 738, para 15.
ibid, para 16.
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 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
Praveen Enterprises
(supra), paras 19-20, 26.
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,—

(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 sub-section (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 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
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.
In re, Interplay (supra), paras 164-167.
ibid, para 165; SBI General Insurance (supra), para 110.
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 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)
In re, Interplay (supra), para 167, 169; SBI General Insurance (supra), para 111.
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. While the
Section 11
court can return a prima

facie finding on this issue, the same does not bind the arbitral

tribunal, which must decide the issue based on evidence and the

applicable legal principles.18 The determination of this issue goes

to the very root of the arbitral tribunal’s jurisdiction, and hence, is

covered under
Section 16
of the ACA.19

19. It is also relevant to take note of this Court’s decision in

Praveen Enterprises
(supra), wherein it held that when a court

appoints the arbitral tribunal under
Section 11
, the arbitral

tribunal’s terms of reference are not restricted to specific disputes

referred by the court, unless the arbitration agreement itself

requires the court to formulate and refer disputes to arbitration.20

20. Considering the purpose of a
Section 11
application for

constitution of an arbitral tribunal and the limited scope of

examination into the existence of the arbitration agreement and

prima facie finding on who are parties to it, it follows that the court
Also see Ajay Madhusudan Patel v. Jyotrindra S. Patel, (2025) 2 SCC 147, para 75.
ibid, paras 73, 76.7.
Praveen Enterprises
(supra), paras 28-29.

Also see
Bharat Petroleum Corporation Ltd. v. Go Airlines (India)
Ltd.
, (2019) 10 SCC 250.
under
Section 11
does not conclusively determine or rule on who

can be made party to the arbitral proceedings. Therefore, merely

because respondent nos. 2 and 3 were not parties before the High

Court under
Section 11
, and disputes against them were not

referred to the arbitrator by order dated 24.11.2021, it does not

mean that they cannot be impleaded at a later stage on this ground

alone.

21. Source of the Arbitral Tribunal’s Jurisdiction and Relevant

Inquiry under
Section 16
: At this stage, it is clear that not being

served with a
Section 21
notice and not being made a party in the

Section 11
application are not sufficient grounds to hold that a

person cannot be made party to arbitral proceedings. We will now

deal with the next question, i.e., when can a person be made party

to the arbitration proceedings?

22. This issue deals with the source of the arbitral tribunal’s

jurisdiction, which is derived from the consent of the parties to

refer disputes to arbitration. 21 Such consent must be gathered

from the arbitration agreement,22 that must in accordance with

Section 7
of the ACA, which provides:
Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd.
, (2015) 13 SCC 477, para 22;
Cox and Kings

(supra), para 69 (Chandrachud, J).
ONGC Ltd. v. Afcons Gunanusa JV, (2024) 4 SCC 481, para 263.
“7. Arbitration agreement.—(1) In this Part, “arbitration
agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may
arise between them in respect of a defined legal relationship, whether
contractual or not.

(2) An arbitration agreement may be in the form of an arbitration
clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in—

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of
telecommunication [including communication through electronic
means] which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the
existence of the agreement is alleged by one party and not denied by
the other.

(5) The reference in a contract to a document containing an arbitration
clause constitutes an arbitration agreement if the contract is in writing
and the reference is such as to make that arbitration clause part of
the contract.”

23. Once a person consents to refer disputes to arbitration, and

enters into an arbitration agreement under
Section 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
Section 21
notice and not referred to

arbitration by the court under
Section 11
.

24. As briefly stated above, the determination of who is a party to

the arbitration agreement falls within the domain of the arbitral
tribunal as per
Section 16
of the ACA.
Section 16
embodies the

doctrine of kompetenz-kompetenz, i.e., that the arbitral tribunal

can determine its own jurisdiction. The provision is inclusive and

covers all jurisdictional questions, including the existence and

validity of the arbitration agreement, who is a party to the

arbitration agreement, and the scope of disputes referrable to

arbitration under the agreement. 23 Considering that the arbitral

tribunal’s power to make an award that binds the parties is derived

from the arbitration agreement, these jurisdictional issues must

necessarily be decided through an interpretation of the arbitration

agreement itself. Therefore, the arbitral tribunal’s jurisdiction

must be determined against the touchstone of the arbitration

agreement.

25. This view finds support in the jurisprudence and practice of

international commercial arbitration. It is notable that while most

national legislations do not expressly provide for joinder of parties

by the arbitral tribunal, this must be done with the consent of all

the parties.24 Gary Born has taken the view that the arbitral

tribunal can direct the joinder of parties when the arbitration
Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd.
, (2020) 2 SCC 455, para 7.11;
Cox
and Kings
(supra), para 163 (Chandrachud, J); Ajay Madhusudhan Patel (supra), para 75.
Redfern and Hunter on International Arbitration (5th edn, Oxford University Press 2009). See also David St
John Sutton, Judith Gill and Matthew Gearing, Russell on Arbitration (23rd edn, Sweet and Maxwell 2009).
agreement expressly provides for the same. However, he states that

in reality, most arbitration agreements, whether ad hoc or

providing for institutional arbitration, neither expressly preclude

nor expressly permit the arbitral tribunal to join parties. In such

cases, the power must be implied,25 particularly when there is a

multi-party arbitration clause in the same underlying contract that

does not expressly address the joinder of parties in the arbitral

proceedings. He states that: “In these circumstances, there is a

substantial argument that the parties have impliedly accepted the

possibility of consolidating arbitrations under their multi-party

arbitration agreement and/or the joinder or intervention of other

contracting parties into such arbitrations… the parties’ joint

acceptance of a single dispute resolution mechanism, to deal with

disputes under a single contractual relationship, reflects their

agreement on the possibility of a unified proceeding to resolve their

disputes, rather than necessarily requiring fragmented proceedings

in all cases.” Further, in jurisdictions where there is no provision

in the national arbitration statute authorising the courts to

consolidate arbitrations or to join parties, it is left to the arbitral

tribunal to determine this issue at the first instance. 26
Gary Born, International Commercial Arbitration, vol 2 (3rd edn, Kluwer Law International 2021) 2777.
ibid, 2788-2789.
26. Therefore, as per the legal principles under the ACA as well

as in international commercial arbitration, it is a foundational

tenet that the arbitral tribunal’s jurisdiction is derived from the

consent of the parties to refer their disputes to arbitration, which

must be recorded in an arbitration agreement. The proper judicial

inquiry to decide a jurisdictional issue under
Section 16
as to

whether a person/entity can be made a party to the arbitral

proceedings will therefore entail an examination of the arbitration

agreement and whether such person is a party to it. If the answer

is in the affirmative, such person can be made party to the arbitral

proceedings and the arbitral tribunal can exercise jurisdiction over

him as he has consented to the same.

27. Returning to the Facts of the Case: Now that we have set out

the legal principles on when can a person be made party to an

arbitration proceeding and how must the arbitral tribunal proceed

under
Section 16
, we will deal with the approach adopted in the

present case. While allowing the
Section 16
application by order

dated 15.02.2024, the arbitral tribunal proceeded only on the

basis that respondent nos. 2 and 3 were not served with the

Section 21
notice and were not parties in the
Section 11

application. The arbitral tribunal did not go into whether these
respondents are parties to the arbitration agreement, and whether

its jurisdiction extends to them. We are extracting the relevant

portion of the arbitral tribunal’s order:

“8. Ld. Counsel for the Claimant has also relied upon various
judgments and in particular the judgment in "
Cox and Kings Ltd. Vs.
SAP India Pvt. Ltd. & Anr.", Arbitration Petition (Civil) No.
38/2020,
dated 06.12.2023 to argue that on the principle of competence-
competence this Tribunal can continue the Arbitral proceedings
against Respondents No.2 and 3 as they are necessary parties to
these proceedings and their presence is required for effective
adjudication of the disputes being raised by the Claimant. In my view
this submission is also without any merit in as much as the principle
of competence-competence can be applied only when the Court or the
Tribunal finds that the presence of even non-signatories of the Arbitral
Agreement is required. A non-signatory of the Arbitral Agreement can
be added in the Arbitral Proceedings if he has played a positive, direct
and substantial role in the negotiations and performance of the
Contract which contains an Arbitral Clause and as such the Court or
the Tribunal may add him also in the proceedings for effectual
adjudication of the disputes between the parties. This principle is like
the provision of
Order 1 Rule 10 of the CPC
. However, in this case this
Tribunal has not at all found or held that the presence of Respondents
No.2 and 3 is essential in these proceedings for effective adjudication
of the disputes being raised by the Claimant. At this stage the
Tribunal is concerned only with the question of joining Respondents
No.2 and 3 without serving upon them a notice under
Section 21
of
the A&C Act, 1996 which admittedly was never served upon them
and as such the Arbitral proceedings initiated by the Claimant
against them are unsustainable.

9. The objection raised by Respondents No.2 and 3 / Applicants in
the present proceedings against them is also on the ground that they
were never made a party to
Section 11
A&C Act, 1996 proceedings
and the High Court while making a reference and appointing the
undersigned as an Arbitrator had only Respondent No. 1 before it. It
is argued that there is no reference qua Respondents No.2 and 3 by
the High Court of Delhi and as such the present proceedings against
them are void and illegal. As already discussed above the principle
of competence-competence is not applicable to the Respondents No. 2
and 3 at this stage. The absence of any reference qua them by the
High Court under
Section 11
of the A&C Act, 1996 renders these
proceedings against them void-ab-initio and as such they cannot be
proceeded against by this Tribunal.”
28. The arbitral tribunal’s approach clearly shows that it 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 under
Section 37
, proceeded on a similar

basis. In view of the legal principles set out above, we are of the

view that this is 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. We will

be elaborating on this issue at a later stage.

29. High Court Decisions on these Issues: Now that we have laid

down the purpose of a
Section 21
notice, the scope of inquiry in a

Section 11
application, and the judicial approach to determining

jurisdictional issues under
Section 16
, including whether a person

can be made party to the arbitration proceedings, we find it

necessary to clarify various decisions by High Courts that deal with

these legal issues.

30. The Delhi High Court in
Alupro Building Systems Pvt Ltd. v.

Ozone Overseas Pvt Ltd.27
allowed an application under
Section 34
2017 SCC OnLine Del 7228.
of the ACA against an award passed by an arbitrator who was

unilaterally appointed by the respondent therein, without issuing

a notice to the petitioner therein under
Section 21
of the ACA. The

High Court proceeded to delineate the various functions served by

a
Section 21
notice as follows:28 (i) To inform the other party as to

the claims, which will enable them to accept or dispute the claims;

(ii) To enable the other party to point out if certain claims are time-

barred, barred by law, or untenable, or if there are counter-claims;

(iii) For arriving at a consensus for appointment of arbitrators

under the arbitration agreement; (iv) For parties to inform each

other about their proposed arbitrator, to enable the other party to

raise any objections/issues regarding qualification; (v) To trigger

the court’s jurisdiction under
Section 11
in case the appointment

procedure fails; and (vi) To fix the date of commencement of

arbitration for the purpose of
Section 43(1)
.

30.1 The decision in
Alupro Building Systems
(supra) has been

relied on by the High Court in its impugned order to hold that the

notice under
Section 21
is a mandatory requirement before a

person can be made party to arbitral proceedings.
ibid, paras 25-30.
30.2 While we agree with the decision insofar as holding that the

notice under
Section 21
is mandatory, unless the contract provides

otherwise, we do not agree with the conclusion that non-service of

such notice on a party nullifies the arbitral tribunal’s jurisdiction

over him. The purpose of the
Section 21
notice is clear – by fixing

the date of commencement of arbitration, it enables the calculation

of limitation and it is a necessary precondition for filing an

application under
Section 11
of the ACA. The other purposes

served by such notice – of informing the respondent about the

claims, giving the respondent an opportunity to admit and contest

claims and raise counter-claims, and to object to proposed

arbitrators – are only incidental and secondary. We have already

held that the contents of the notice do not restrict the claims, and

any objections regarding limitation and maintainability can be

raised before the arbitral tribunal, and the ACA provides

mechanisms for challenging the appointment of arbitrators on

various grounds. Hence, while a
Section 21
notice may perform

these functions, it is not the primary or only mechanism envisaged

by the ACA.

30.3 In this light, and considering that in the facts of the present

case a
Section 21
notice was in fact issued to respondent no. 1, we
find it difficult to accept that the decision in
Alupro Building

Systems
(supra) can be relied on to entirely reject the arbitral

tribunal’s jurisdiction over respondent nos. 2 and 3.

31. The next decision is in
De Lage Landen Financial Services

India (P) Ltd. v. Parhit Diagnostic (P) Limited29
, which has been

relied on by the appellant. This decision arose out of a
Section 11

application that was allowed by the Delhi High Court by holding

that the respondent therein had due notice of the arbitration

proceedings.

Upon considering the facts of the case and the

appointment mechanism in the arbitration agreement therein, the

Court held that the rationale of serving a
Section 21
notice as
laid

down in

Alupro
(supra) stood fulfilled, and hence, the
Section 11

application was maintainable.

In the present impugned order, the

High Court differentiated this decision by holding that the

respondent in
De Lage Landen Financial Services
(supra) was made

a party to the
Section 11
proceedings, which is absent in this case.

At this stage, it will suffice to say that
De Lage Landen Financial

Services
(supra) does not seem to have deviated from the legal

position on a
Section 21
notice
laid down in

Alupro
(supra), and its

decision must be understood in the context of its facts.
2021 SCC OnLine Del 4160.
32. Another relevant decision is that of
Arupri Logistics (P) Ltd. v.

Vilas Gupta
30, wherein the Delhi High Court was dealing with the

arbitral tribunal’s power to implead non-signatories to the

arbitration agreement as parties. It held that unlike a court that

has the power to implead parties under
Order I, Rule 10 of the

Code of Civil Procedure
, 1908, no such provision exists under the

ACA. Further, proceeding on the basis that a non-signatory is not

a party to the arbitration agreement, the High Court held that the

arbitral tribunal cannot exercise jurisdiction over a non-signatory

and impleading such person would be contrary to consent being

the foundation of arbitration.

It is necessary to note that this

decision was prior to the Constitution Bench judgment in
Cox and

Kings
(supra), wherein it was held that non-signatories can be

impleaded in the arbitration if their conduct shows that they are

veritable parties to the arbitration agreement.

We also find that the

reasoning in
Arupri Logistics
(supra) is in line with what we have

held hereinabove, i.e., the jurisdiction of the arbitral tribunal to

implead a person depends on whether such person is a party to

the arbitration agreement.
2023 SCC OnLine Del 4297.
33. Finally, we must refer to the Bombay High Court’s decision

in Cardinal Energy & Infra Structure (P) Ltd. v. Subramanya

Construction & Development Co. Ltd. 31, which has a similar factual

matrix as this case. The petitioners therein were not served with

the
Section 21
notice or made party in the
Section 11
proceedings.

Rather, they were impleaded by the arbitral tribunal after it had

framed issues, upon an application by respondent nos. 1 and 2

therein. In a
Section 34
application against the arbitral award, the

High Court considered the issue of whether the petitioners therein,

who were non-signatories to the arbitration agreement, could have

been impleaded without them being referred to arbitration in the

order under
Section 11
.
By referring to
Cox and Kings
(supra), the

relevant portion of which we have extracted hereinabove, the High

Court held that the arbitral tribunal has the power to decide

whether a non-signatory is bound by the arbitration agreement.

The referral court only gives a prima facie finding on this issue,

and leaves it to the arbitrator to decide the same. By relying on

this rationale, the High Court held that the non-joinder of a party

in a
Section 11
application does not preclude its impleadment in

the arbitration proceedings by the arbitral tribunal.
2024 SCC OnLine Bom 964.
33.1 In the impugned order in this case, the High Court

differentiated Cardinal Energy & Infra Structure (supra) on the

ground that the arbitral tribunal’s order in this case does not hold

respondent nos. 2 and 3 to be proper parties to the arbitration

proceedings. However, as we have stated above as well, the arbitral

tribunal did not decide the issue of whether these respondents are

parties to the arbitration agreement and proper parties to the

proceedings before it. Hence, the decision in Cardinal Energy &

Infra Structure (supra) was not properly considered by the High

Court in this case.

34. Whether Respondent Nos. 2 and 3 are Parties to the Arbitration

Agreement: In light of the legal position set out hereinabove, we

will now consider whether respondent nos. 2 and 3 are parties to

the arbitration agreement, in order to determine whether the

arbitral tribunal can exercise jurisdiction over them. While we

determine this issue, it is necessary to set out the contours of our

jurisdiction. Since this appeal arises from the dismissal of an

appeal under
Section 37(2)(a)
of the ACA against the arbitral

tribunal’s order deciding its jurisdiction under
Section 16
, we are

not confined by the grounds set out in
Section 34
of the ACA. While

deciding an appeal against the arbitral tribunal’s order under
Section 16
, the appellate courts “must have due deference to the

grounds which have weighed with the Tribunal in holding that it

lacks jurisdiction having regard to the object and spirit underlying

the statute which entrusts the Arbitral Tribunal with the power to

rule on its own jurisdiction.”32

35. As we have held above, the arbitral tribunal in this case did

not delve into the issue of whether respondent nos. 2 and 3 are

parties to the arbitration agreement and consequently, whether

they can be impleaded in the arbitral proceedings. It is also

undisputed that these respondents are not signatories to the LLP

Agreement that contains the arbitration agreement in Clause 40.

In this light, we are required to examine whether respondent nos.

2 and 3 are parties to the arbitration agreement.

36.
In
Cox and Kings
(supra), this Court held that non-signatories

are parties to the arbitration agreement if the conduct of the

signatories and non-signatories indicates mutual intention that

the latter be bound by the arbitration agreement. 33 The test to

determine whether such a non-signatory is a party is as follows:

“132. We are of the opinion that there is a need to seek a balance
between the consensual nature of arbitration and the modern
commercial reality where a non-signatory becomes implicated in a
commercial transaction in a number of different ways. Such a balance
ONGC Ltd. v. Discovery Enterprises (P) Ltd., (2022) 8 SCC 42, para 55.
Cox and Kings
(supra), paras 116, 120, 123, 126 (Chandrachud, J)
can be adequately achieved if the factors laid down under Discovery
Enterprises are applied holistically. For instance, the involvement of
the non-signatory in the performance of the underlying contract in a
manner that suggests that it intended to be bound by the contract
containing the arbitration agreement is an important aspect. Other
factors such as the composite nature of transaction and commonality
of subject-matter would suggest that the claims against the non-
signatory were strongly interlinked with the subject-matter of the
tribunal's jurisdiction.
Looking at the factors holistically, it could be
inferred that the non-signatories, by virtue of their relationship with
the signatory parties and active involvement in the performance of
commercial obligations which are intricately linked to the subject-
matter, are not actually strangers to the dispute between the
signatory parties.” 34

36.1 The factors
laid down in
ONGC v. Discovery Enterprises

(supra) must be holistically considered to determine whether non-

signatories are parties to the arbitration agreement, which are as

follows:

“40. In deciding whether a company within a group of companies
which is not a signatory to arbitration agreement would nonetheless
be bound by it, the law considers the following factors:

(i) The mutual intent of the parties;

(ii) The relationship of a non-signatory to a party which is a signatory
to the agreement;

(iii) The commonality of the subject-matter;

(iv) The composite nature of the transactions; and

(v) The performance of the contract.”

36.2 Finally, in light of the requirement under
Section 7
of the ACA

that the arbitration agreement must be in writing, the mutual

intention of non-signatories to be bound by the arbitration

agreement must be evidenced in writing. The non-signatory’s

conduct in the formation, performance, and termination of the
Followed in Ajay Madhusudhan Patel (supra).
contract, and surrounding circumstances like direct relationship

with signatory parties, commonality of subject-matter, and

composite nature of transaction must be ascertained from the

record of the agreement, as held in
Cox and Kings
(supra):

“229. Since the fundamental issue before the Court or tribunal under

Section 7(4)(b)
and the Group of Companies doctrine is the same, the
doctrine can be subsumed within
Section 7(4)(b)
. Consequently, the
record of agreement that evidences conduct of the non-signatory in
the formation, performance, and termination of the contract and
surrounding circumstances such as its direct relationship with the
signatory parties, commonality of subject-matter, and composite
nature of transaction, must be comprehensively used to ascertain the
existence of the arbitration agreement with the non-signatory. In this
inquiry, the fact of a non-signatory being a part of the same group of
companies will strengthen its conclusion. In this light, there is no
difficulty in applying the Group of Companies doctrine as it would be
statutorily anchored in
Section 7
of the Act.

230.1. An agreement to refer disputes to arbitration must be in a
written form, as against an oral agreement, but need not be signed
by the parties. Under
Section 7(4)(b)
, a court or Arbitral Tribunal will
determine whether a non-signatory is a party to an arbitration
agreement by interpreting the express language employed by the
parties in the record of agreement, coupled with surrounding
circumstances of the formation, performance, and discharge of the
contract. While interpreting and constructing the contract, courts or
tribunals may adopt well-established principles, which aid and assist
proper adjudication and determination. The Group of Companies
doctrine is one such principle.”

37. In this case, Clause 40 of the LLP Agreement (extracted

hereinabove) is expansive in its wording. It covers disputes arising

between the partners inter se each other, and between the partners

on the one hand and the LLP and its administrator on the other

hand, when such disputes pertain to the LLP Agreement or its

construction, or relate to the rights, duties, and liabilities of the
partners. This 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

appellant and respondent no. 1, who are the partners. Further, the

arbitration agreement itself includes within its scope disputes that

may arise between the partners and the LLP (respondent no. 2),

and the partners and the administrators of the LLP, i.e.,

respondent no. 3 as he is the CEO of the LLP and responsible for

its administration under Clause 8 of the LLP Agreement. The

question that must be answered is whether respondent no. 2 and

3 have consented to being bound by such arbitration agreement.

38. We must answer this question in the affirmative based on the

following considerations. With respect to respondent no. 2, it 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. Hence, it can be said that

respondent no. 2 is 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. Hence, 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. Similarly, 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. His obligations as the CEO of the

LLP are therefore derived under the LLP Agreement, and he is

acting under this contract. Therefore, it can be said that

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.

39. Therefore, in view of the fact that respondent nos. 2 and 3

have, through their conduct, consented to perform contractual

obligations under the LLP Agreement, it is clear that 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 under
Section 16
of the ACA and

as per the kompetenz-kompetenz principle.
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.

41. In light of the above reasoning, we allow the present appeal

and set aside the impugned judgment and order of the High Court

of Delhi dated 08.07.2024 in Arb. A. (Comm.) 24/2024. We direct

that 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. Considering
that the claim was filed in 2022, we would request the arbitral

tribunal to complete the hearings and pass its award as

expeditiously as possible.

42. No order as to costs.

43. Pending applications, if any, stand disposed of.

………………………………....J.
[PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J.
[MANOJ MISRA]

NEW DELHI;

APRIL 17, 2025