A) ABSTRACT / HEADNOTE

A focused analysis of Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. & Ors. (Civil Appeal No. 5297 of 2025) examining the threshold questions of joinder, Section 21 notice, Section 11 applications and the scope of the arbitral tribunal’s jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996 (hereinafter ACA) in the context of an LLP arrangement.

The Supreme Court clarified that while a notice invoking arbitration under Section 21 is mandatory because it fixes the commencement date of arbitration (which in turn governs limitation and the applicable statutory/arbitral regime), the non-service of such notice on certain persons does not ipso facto deprive the arbitral tribunal of jurisdiction to implead them, provided they are parties to the arbitration agreement or have otherwise manifested consent to be bound by it.

The Court reiterated the limited, prima facie scope of the referral court under Section 11 (confined to existence/formal validity of an arbitration agreement under Section 11(6A)), and affirmed that determination of who is a party to the arbitration agreement — including non-signatories — is a core jurisdictional question for the tribunal under Section 16 (kompetenz-kompetenz).

Applying the Discovery/Group of Companies factors and the tests articulated in Cox & Kings and related precedents, the Court found that respondent nos. 2 and 3 (the LLP and its CEO) by conduct and contractual role were bound by the LLP Agreement’s arbitration clause and could therefore be impleaded; the High Court order dismissing the appellant’s Section 37 challenge was set aside and the arbitral proceedings ordered to continue with impleading of respondent nos. 2 and 3.

Keywords: Section 21, Section 11, Section 16, kompetenz-kompetenz, non-signatory joinder, LLP Agreement, limitation, privity & conduct, Cox & Kings, Discovery Enterprises.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

This appeal arises from a dispute under an LLP framework where the appellant and respondent No.1 were signatories to an LLP Agreement containing a broad arbitration clause (Clause 40). The LLP (respondent No.2) and its CEO (respondent No.3) were not signatories to the original LLP Agreement.

The appellant served a Section 21 notice dated 17.11.2020 only on respondent No.1, thereafter filed for appointment of an arbitrator under Section 11 impleading respondent No.1 alone, and obtained a reference to arbitration.

Later, in its statement of claim, the appellant impleaded respondent nos. 2 and 3; respondents 1–3 challenged the tribunal’s jurisdiction in a Section 16 application arguing lack of Section 21 service and non-joinder in the Section 11 petition; the arbitral tribunal allowed the Section 16 challenge and dismissed proceedings against respondents 2 and 3; the High Court dismissed the appellant’s Section 37 appeal maintaining that absence of notice and non-inclusion in the Section 11 petition precluded arbitration qua respondents 2 & 3.

The Supreme Court framed two central legal questions:

(i) whether service under Section 21 and joinder in Section 11 are prerequisites to implead a person/entity in arbitration;

(ii) what is the source of an arbitral tribunal’s jurisdiction over a person sought to be impleaded and the relevant inquiry under Section 16.

The Court methodically analysed the statutory text, prior precedent (including Cox & Kings, Praveen Enterprises and Discovery/ONGC line), and international doctrinal sources to hold that Section 21 notice is mandatory for commencement and limitation purposes, and Section 11 court’s role is limited to prima facie work for constituting the tribunal, but absence of service or non-joinder in the Section 11 petition does not conclusively oust the tribunal’s power to decide whether a person is a party to the arbitration agreement that question falls for adjudication under Section 16 by reference to consent manifest in the arbitration agreement and surrounding conduct.

The bench applied tests from Cox & Kings and Discovery Enterprises/ONGC v. Discovery Enterprises to the facts and held respondent nos. 2 and 3 were by conduct parties to the arbitration clause and therefore could be impleaded; the High Court’s order was set aside and impleadment ordered.

D) FACTS OF THE CASE

The operative facts center on an LLP Agreement dated 01.06.2012 between the appellant and respondent No.1 to form Vishal Capricorn Energy Services LLP (respondent No.2) for oil & gas projects; Clause 8 designated respondent No.3 as CEO to administer LLP business and Clause 40 provided a broad arbitration clause covering disputes between partners and between partners and the LLP and its administrators.

A project (ITF, Tenughat) was executed by respondent No.2 pursuant to a Supplementary Agreement and MoU dated 29.01.2013, and the appellant invested Rs. 1.1 crores. Disputes arose in 2018 over account reconciliation; the appellant issued demand notices in October and December 2019 and a Section 21 notice on 17.11.2020 — crucially served only on respondent No.1 (through respondent No.3).

A Section 11 petition impleading respondent No.1 alone resulted in appointment of a sole arbitrator by the Delhi High Court on 24.11.2021 to adjudicate disputes “arising out of the LLP Agreement read with Supplementary LLP Agreement and MoU”. After reference, the appellant’s statement of claim impleaded respondent nos. 2 & 3 though the initial prayer targeted respondent No.1 alone; respondents 1–3 filed a Section 16 objection contending arbitration could not be maintained against respondents 2 & 3 because

(a) they were not served with the Section 21 notice,

(b) they were not made parties to the Section 11 petition / court reference. The tribunal by order dated 15.02.2024 allowed the Section 16 objection and held proceedings against respondents 2 & 3 unsustainable; the High Court in Arb. A.(Comm.) No.24/2024 dismissed the appellant’s Section 37 challenge on similar reasoning. The appellant then appealed to the Supreme Court.

On appeal the Supreme Court found that the tribunal and the High Court erred by stopping the inquiry at absence of Section 21 service and non-joinder in Section 11, without examining whether respondents 2 & 3 were parties to the arbitration agreement by conduct and agreement terms; the Court held that question is a jurisdictional one for the tribunal under Section 16 and remitted with directions to implead respondents 2 & 3 and continue proceedings from the tribunal’s order dated 15.02.2024.

E) LEGAL ISSUES RAISED

i. Whether service of a Section 21 notice on a person and joinder of that person in a Section 11 application are preconditions to implead them as a party to arbitral proceedings?
ii. What is the source of an arbitral tribunal’s jurisdiction over a person sought to be impleaded and what is the appropriate inquiry under Section 16 to determine this jurisdiction?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The appellant argued that under the doctrine of kompetenz-kompetenz and in light of Cox & Kings, the arbitral tribunal has the competence to implead signatories and non-signatories where disputes arise from the same underlying agreement and their presence is necessary for complete adjudication; respondents 2 & 3 were voluntarily and consensually involved in formation, performance and execution of the LLP Agreement, Supplementary Agreement and MoU and were therefore bound by Clause 40; respondent No.3 in particular occupied the CEO/admin role under Clause 8 and thus acted under the LLP Agreement.

The appellant relied on Section 7 (writing & manifestation of arbitration agreement), Section 23(4) of the LLP Act and the composite transaction tests in ONGC v. Discovery Enterprises and Cox & Kings to show that the conduct, objectives and documents evidenced mutual intent and made respondents 2 & 3 parties to the arbitration agreement. It further contended that non-service of the Section 21 notice on respondents 2 & 3 did not extinguish the tribunal’s jurisdiction where consent is established and that the referral court’s limited prima facie role under Section 11(6A) cannot bind the tribunal’s determination on real parties to the arbitration.

G) RESPONDENT’S ARGUMENTS

i. Respondents contended that arbitration cannot be maintained against respondent nos. 2 & 3 because

(a) they were not served with the Section 21 notice which fixes commencement and limitation;

(b) they were not included in the Section 11 petition and were not referred by the court in the appointment order, hence no arbitral reference exists against them; absence of service and non-joinder impinged on principles of natural justice and fair notice; the tribunal’s joinder power could not be exercised in the teeth of such absence, and Cox & Kings was distinguishable on the facts as there was no finding that respondents 2 & 3 were necessary for effective adjudication.

They argued consent could not be imputed merely by corporate structure and that contractual privity was determinative.

H) RELATED LEGAL PROVISIONS 

i. Section 7, Arbitration and Conciliation Act, 1996 (definition & writing requirement of arbitration agreement).
ii. Section 11 (appointment of arbitrators; Section 11(6A) limited prima facie inquiry).
iii. Section 16 (competence-competence — tribunal’s power to decide jurisdictional questions).
iv. Section 21 (commencement of arbitral proceedings — receipt of request by respondent).
v. Section 23(3) (amendment of statement of claim in arbitral proceedings — tribunal’s power to permit ministerial amendments).
vi. Limitation Act, 1963 interplay via Section 43 of ACA (limitation reckoned from commencement under Section 21).

I) JUDGEMENT 

The Supreme Court’s judgment proceeds in structured stages: textual analysis of Section 21, role and scope of Section 11, identification of the source of tribunal jurisdiction and application to facts.

First, the Court stressed that Section 21 fixes commencement of arbitral proceedings on receipt of a request unless parties agree otherwise; this date serves determinative roles — limitation computation (Section 43), applicability of prior arbitration statutes, and which amendment regime applies to the arbitration.

The Court therefore held that while service of a Section 21 notice is mandatory for those purposes, non-service on certain persons does not automatically oust the tribunal’s power to implead them: the juridical question is whether those persons are parties to the arbitration agreement and have consented to arbitration.

The Court relied on prior authorities (including Milkfood, Praveen Enterprises, Geo-Miller, BCCI v. Kochi Cricket, Cox & Kings) to frame the limited, prima facie role of the court under Section 11(6A) the court confines itself to a formal existence inquiry and must not undertake a mini-trial into the merits or complex factual disputes about non-signatory status.

The tribunal, applying Section 16 and the kompetenz-kompetenz doctrine, must decide jurisdictional questions including who is a party, existence and validity of the arbitration agreement and scope of reference. On the facts the Court examined Clause 40 of the LLP Agreement: broad drafting encompassed disputes “between partners inter se and/or between the partner(s) and LLP … and administrators” and hence prima facie captured the LLP and its administrator.

The Court applied the Discovery/ONGC factors (mutual intent, relationship to signatory, commonality of subject matter, composite transaction, performance of contract) as distilled and applied in Cox & Kings and concluded respondent No.2 (LLP) was created under and performed pursuant to the LLP Agreement and related Supplementary Agreement/MoU and respondent No.3’s position and obligations derived from Clause 8; by conduct both respondents had manifested consent to the arbitration clause.

Consequently, despite absence of service and non-inclusion in the Section 11 petition, respondents 2 & 3 were parties to the arbitration agreement and could be impleaded; the tribunal’s order that dismissed proceedings against them on procedural grounds was incorrect. The Supreme Court set aside the High Court order, directed impleadment of respondents 2 & 3 and continued arbitral proceedings from the tribunal’s earlier order.

The Court also reiterated that objections about limitation and maintainability remain open for adjudication by the tribunal and did not foreclose such defenses. The Court emphasized deference to tribunal’s Section 16 adjudication, but held tribunals must actually apply kompetenz-kompetenz by addressing the core question: is the non-signatory a party by written record/conduct as per Section 7, rather than short-circuiting inquiry by focusing solely on procedural non-service.

a. RATIO DECIDENDI

The dispositive legal principle is that an arbitral tribunal’s jurisdiction flows from the consent recorded in the arbitration agreement under Section 7; therefore, whether a person/entity can be made a party to arbitration is a jurisdictional question under Section 16 and must be decided by the tribunal on evidence of written agreement or conduct indicating consent.

A Section 21 notice is mandatory to fix commencement and limitation, and a Section 11 court conducts only a limited prima facie inquiry — but absence of service/joinder in Section 11 does not automatically strip the tribunal of jurisdiction to implead a person who is, by conduct and the terms of the agreement, bound by the arbitration clause.

The tribunal must inquire into the non-signatory’s nexus to the contract using established multi-factor tests (mutual intent, relationship, commonality of subject matter, composite transaction, performance). This is the binding ratio.

b. OBITER DICTA

The Court made observations reinforcing procedural norms:

(i) Section 21’s multiple functions (limitation, choice of law, triggering Section 11) were emphasised and the Court noted that non-inclusion in the Section 21 notice may affect limitation calculation for claims first raised at arbitration;

(ii) the Section 11 court should avoid extensive factual probes and leave complex non-signatory inquiries to the tribunal;

(iii) where arbitration agreements expressly provide for joinder/consolidation, that express mechanism should govern;

(iv) international doctrinal literature (Born; Redfern & Hunter) supports an implied power for joinder in multi-party contractual matrices persuasive but not determinative of Indian statutory interpretation. These observations guide tribunals/courts but are not strictly necessary to the outcome.

c. GUIDELINES

1. Section 21 must be issued to at least the primary respondent(s) to fix the commencement date; tribunal should note limitation consequences for claims raised for first time at arbitration.

2. A Section 11 court’s inquiry is limited under Section 11(6A) to prima facie existence and formal validity of an arbitration agreement; courts must not undertake deep factual mini-trials on non-signatory status.

3. The arbitral tribunal, under Section 16 (kompetenz-kompetenz), must examine whether the person sought to be impleaded is a party to the arbitration agreement in writing per Section 7 — by evidence of conduct, contractual role, composite transaction or group/company linkages. Use Discovery/ONGC factors holistically.

4. Non-service of Section 21 or non-inclusion in a Section 11 petition does not ipso facto bar impleadment where consent (express or evidenced by conduct) exists; however procedural protections (natural justice: notice, opportunity) must be observed before joinder.

5. Tribunals should record clear findings when exercising competence to join non-signatories, identifying factual basis (documents, acts, performance) and applying the multi-factor test to avoid reversal on appeal.

J) CONCLUSION & COMMENTS

The decision pragmatically balances the temporal-protective purposes of Section 21 (limitation, choice of law, trigger for Section 11) with arbitration’s consensual foundation: consent, evidenced in writing or conduct, is the wellspring of tribunal jurisdiction.

The Court’s insistence that Section 11 courts conduct only a limited prima facie inquiry preserves speedy constitution of tribunals while ensuring complex multi-party factual questions about non-signatory status are decided by the arbitral forum under Section 16. This preserves the doctrine of kompetenz-kompetenz and avoids procedural formalism defeating substantive adjudication where consent is proven by conduct.

Practically, parties drafting multi-party contracts/LLP agreements should (a) draft clear joinder/third-party/Group-of-Companies clauses, (b) ensure notice regimes are comprehensive to avoid contested limitation issues, and (c) contemporaneously record roles of administrators/CEOs to avoid later fact-intensive disputes.

Tribunal practice should entail full, reasoned findings when joinder is allowed; referral courts should resist overreaching into merits when ruling under Section 11(6A). On the facts, impleadment of the LLP and CEO was consistent with Clause 40’s broad scope and their conduct; the Supreme Court’s remedial direction to continue proceedings (with impleadment) squarely vindicates arbitration’s object efficient, consensual resolution without permitting procedural lacunae to stymie substantive rights.

K) REFERENCES

a. Important Cases Referred :
i. Cox and Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1 (Constitution Bench) — discussed and followed as authoritative on non-signatory joinder and tribunal’s competence.
ii. State of Goa v. Praveen Enterprises, (2012) 12 SCC 581 — on Section 21 notice & scope of claims.
iii. Milkfood Ltd. v. GMC Ice Cream (P) Ltd., (2004) 7 SCC 288 — on limitation and commencement date under Section 21.
iv. ONGC Ltd. v. Discovery Enterprises (P) Ltd., (2022) 8 SCC 42 — factors for non-signatory inclusion (Discovery factors).
v. Praveen Enterprises and Bharat Petroleum v. Go Airlines — on referral court limits.

b. Important Statutes Referred :
i. Arbitration and Conciliation Act, 1996 — Sections 7, 11, 16, 21, 23, 43.
ii. Limitation Act, 1963 (interplay via Section 43).
iii. Limited Liability Partnership Act, 2008 — Section 23(4), Schedule I referenced for LLP-partners arbitration matrix.