Sections 21, 11 and 16 – Arbitration Act – Bar to impleadment of parties in the Statement of Claim
On 1.6.2012, the appellant and the respondent no.1 formed LLP of respondent no.2 Vishal Capricorn Energy Services. Respondent No.3 is the Director of the LLP and also designated as CEO of the LLP. Clause 40 of the LLP Agreement provides for dispute resolution through arbitration.
On 31.12.2012, the Oil India Ltd awarded contract to a consortium of which the respondent no.1 LLP was a member. The Consortium sub-contracted the said project to the respondent no.1. The appellant and the respondent no.1 executed supplementary agreement and MoU of 29.1.2013 for project execution through respondent no.2. The appellant infused funds of Rs.1.1 crores for the project.
The disputes arose in 2018 between the appellant and the respondent no.2.
The appellant issued notice only to the respondent no.1 through its Director respondent no.3 and then filed section 11 petition only against the respondent no.1.
The High Court appointed the sole Arbitrator to adjudicate the disputes stated to have arisen out of the LLP Agreement read with Supplementary LLP agreement and MoU both dated 29.1.2023.
However, the appellant impleaded respondent nos.2 and 3 to the arbitration in the statement of claim.
Respondents filed section 16 application raising objections including jurisdiction of the Arbitrator on the ground that arbitration is not maintainable against respondent nos.2 and 3 as they were not parties to section 21 notice and also section 11 petition. Respondent No.3 was not a party to the LLP Agreement in his individual capacity.
The appellant filed application under Section 23(3) to amend statement of claim to bring on record detailed memo of parties and to amend prayer clause to include respondent nos.2 and 3 as well.
This application for amendment was allowed on 1.8.2023 on the ground that these are ministerial amendments and do not change averments in the original statement of claim.
On 15.2.2024, the Arbitrator allowed section 16 application and held that arbitration against respondent nos.2 and 3 was not maintainable in the absence of section 21 notice and the High Court refer arbitration against them.
HELD that non-service of section 21 notice and the absence of disputes being raised against respondent nos.2 and 3 in the notice do not automatically bar their impleadment to the arbitral proceedings.
The Court under section 11 does not conclusively determine or rule on who can be made party to the arbitral proceedings. Therefore, the respondent nos.2 and 3 can be impleaded at a later stage.
Once a person consents to refer disputes to arbitration under the agreement, it is under this contractual obligation that a person can be impleaded as a party to the arbitral proceedings even if not served with section 21 notice and not referred to arbitration by Section 11 Court.
Judgment dated 17.4.2025 of the Supreme Court of India in Civil Appeal No.5297 of 2025 of Adavya Projects Pvt Ltd Vs. M/s. Vishal Structurals Pvt Ltd and others
