ADAVYA PROJECTS PVT. LTD. Vs. M/S VISHAL STRUCTURALS PVT. LTD.

JUDGEMENT

(1.) Leave granted.

(2.) The issues arising in the present appeal are whether the service of notice invoking arbitration under Sec. 21 of the Arbitration and Conciliation Act, 1996 [Hereinafter "the ACA"] on a person and joinder of such person in the application under Sec. 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 Sec. 16, took the view that service of a Sec. 21 notice and being made party to the Sec. 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 Sec. 37, from which the present appeal arises. Upon consideration of the purpose and scope of a Sec. 21 notice and Sec. 11 application, as well as the source of the arbitral tribunal's jurisdiction being the arbitration agreement and the principle of kompetenz-kompetenz under Sec. 16 of the ACA, we have allowed the present appeal by answering the issues as follows: First, while a notice invoking arbitration under Sec. 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 Sec. 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 Sec. 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 dtd. 1/6/2012 to form a Limited Liability Partnership [Hereinafter "LLP"] by the name of Vishal Capricorn Energy Services 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: