Adavya Projects Pvt. Ltd. Vs Vishal Structurals Pvt. Ltd. & Ors. (Supreme Court of India)
Summary: The Supreme Court considered whether a person or entity can be impleaded in arbitral proceedings despite not having been served with a notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 and not having been joined in the application under Section 11 for appointment of an arbitrator. The Court held that although a Section 21 notice is mandatory for determining the commencement of arbitral proceedings, limitation and the applicable arbitration law, its non-service on a person does not by itself prevent that person from being impleaded subsequently.
Similarly, the purpose of a Section 11 application is primarily the constitution of the arbitral tribunal, and the referral court undertakes only a limited prima facie examination of the existence of the arbitration agreement and the parties to it. The arbitral tribunal is not conclusively restricted by the parties named in the Section 11 proceedings. The Supreme Court reiterated the doctrine of kompetenz-kompetenz under Section 16 and held that the decisive inquiry is whether the person sought to be impleaded is a party to the arbitration agreement.
Applying the principles governing non-signatories, including the Constitution Bench decision in Cox and Kings Ltd. v. SAP India Pvt. Ltd., the Court held that respondent nos. 2 and 3 had, through their conduct, consented to the arbitration agreement contained in Clause 40 of the LLP Agreement. Respondent no. 2, the LLP itself, operated under the LLP Agreement, while respondent no. 3 derived his position and obligations as CEO from that agreement. The appeal was accordingly allowed and the respondents were directed to be impleaded before the arbitral tribunal.
