Non-Service of Section 21 Notice Not a Bar to Being Made Party in Arbitration

Last Updated on April 20, 2025 by Shianjany Pradhan

The Supreme Court recently held that the non-service of a notice under Section 21 of the Arbitration and Conciliation Act, 1996, and the absence of a party in a Section 11 application for appointment of an arbitrator, do not by themselves bar a person from being made a party to arbitral proceedings.

The key factor, the Court observed, is whether the person sought to be impleaded is a party to the arbitration agreement, either expressly or by conduct.

The case arose from a dispute between the appellant and respondent No.1, who had entered into an LLP agreement containing an arbitration clause. Respondent No.3, though not a signatory, was designated as CEO of the LLP (respondent No.2), and all parties subsequently acted under the agreement.

When disputes emerged, the appellant issued a Section 21 notice to respondent No.1 alone and only filed a Section 11 application against them. Once arbitration was initiated, the appellant impleaded respondents No.2 and 3 in its statement of claim. These respondents objected under Section 16, arguing the arbitration clause did not bind them as they had not received notice nor were they parties to the Section 11 application. Both the arbitral tribunal and the High Court upheld this objection.

Reversing these findings, the Supreme Court clarified that while the Section 21 notice is mandatory to commence arbitration, its non-service does not automatically exclude a party from being impleaded later, if the arbitration agreement otherwise binds them.

It further held that a Section 11 court’s role is limited to appointing arbitrators through a prima facie assessment and does not finally determine the scope of the tribunal’s jurisdiction. Under Section 16, the tribunal retains full authority to rule on who is bound by the arbitration clause, based on the doctrine of kompetenz-kompetenz.