“The Adavya Projects Doctrine” – Joinder of Parties in Arbitration Is Governed by Consent, Not by Service of Section 21 Notice or Section 11 Referral

1. Introduction

Adavya Projects Pvt. Ltd. v. M/s Vishal Structurals Pvt. Ltd. (2025 INSC 507) sets a pivotal precedent on when and how non‑signatory or newly‑impleaded entities can be bound by, and participate in, an ongoing arbitration. The Supreme Court was confronted with an arbitral tribunal decision—affirmed by the Delhi High Court—holding that Respondent 2 (the LLP) and Respondent 3 (its CEO) could not be joined because they (a) did not receive a notice invoking arbitration under Section 21 of the Arbitration & Conciliation Act, 1996 (ACA) and (b) were not parties to the Section 11 proceedings through which the sole arbitrator was appointed. The Court’s ruling clarifies:

• Section 21 notice, though mandatory to commence arbitration, does not condition the tribunal’s jurisdiction over a person who is otherwise party to the arbitration agreement.
• The Section 11 court’s prima facie order of appointment does not freeze the list of parties; the arbitral tribunal retains full Kompetenz‑Kompetenz under Section 16 to decide joinder.
• The only touchstone for jurisdiction is the person’s consensual submission to arbitration traceable to a valid arbitration agreement (Section 7), including by conduct recognised under the Group of Companies doctrine.

2. Summary of the Judgment

Allowing the appeal, the Supreme Court (Justices Pamidighantam Sri Narasimha and Manoj Misra) reversed both the tribunal’s Section 16 ruling and the High Court’s Section 37 order. Key holdings:

1. Section 21 Notice – Failure to serve every proposed party is not jurisdictional; it only affects limitation calculations and related procedural aspects.
2. Section 11 Appointment – The court’s function is confined to constituting the tribunal after a prima facie look at existence of an arbitration agreement. Its referral order does not oust the tribunal’s power to add parties later.
3. Source of Jurisdiction – Consent embodied in the arbitration agreement is decisive; the tribunal must ask whether the person is a “party” in terms of Section 7, including by application of the Group of Companies / composite‑transaction principles.
4. Application to Facts – Respondent 2 (LLP) and Respondent 3 (CEO) had, by their roles under the LLP Agreement (containing Clause 40 arbitration clause) and their conduct in executing the ITF Project, manifested consent to be bound. They are proper parties notwithstanding absence from Section 21/Section 11 stages.
5. The matter was remanded to the same arbitrator to continue proceedings with Respondents 2 & 3 impleaded.

3. In‑Depth Analysis

3.1 Precedents Cited and Their Influence

• State Of Goa v. Praveen Enterprises (2012) 12 SCC 581 – Clarified that claims not mentioned in Section 21 notice may still be raised; used to demonstrate notice’s limited reach.
• Cox & Kings Ltd. v. SAP India (2024) 4 SCC 1 – Constitution Bench recognised tribunal’s power to decide joinder of non‑signatories; cornerstone for affirming Kompetenz‑Kompetenz in joinder questions.
• Milkfood Ltd. v. GMC Ice Cream (2004) 7 SCC 288 and BSNL v. Nortel (2021) 5 SCC 738 – Provided doctrinal background on Section 21’s role in limitation and Section 11 trigger.
• ONGC v. Discovery Enterprises (2022) 8 SCC 42 – Listed factors (mutual intent, relationship, commonality etc.) to bind non‑signatories; framework adopted to hold LLP & CEO bound.
• Cardinal Energy & Infrastructure v. Subramanya (Bom HC 2024) & Alupro Building Systems v. Ozone Overseas (Del HC 2017) – High‑Court rulings analysed and reconciled; Supreme Court clarified their correct reach.

3.2 Legal Reasoning

The Court’s chain of logic may be distilled into three concentric inquiries:

1. Statutory Purpose Inquiry
   Section 21 is a “date‑fixing” device. Section 11 is a “tribunal‑constituting” device. Neither provision creates a party‑inclusion prerequisite absent from the text.
2. Jurisdictional Inquiry under Section 16
   • The tribunal’s power springs solely from the arbitration agreement (Section 7).
   • All objections relating to “party status” are therefore intrinsically jurisdictional and must be adjudicated by the tribunal unless patently outside its remit.
3. Consent Inquiry (Group of Companies doctrine) Applying Discovery Enterprises factors, the Court found:
   • Respondent 2 (LLP) is a creature of the LLP Agreement; the agreement’s dispute‑resolution clause necessarily binds it.
   • Respondent 3, as CEO designated in the same agreement and key participant in project execution, manifested intent to be bound for disputes arising from his managerial actions.

3.3 Projected Impact

The “Adavya Projects Doctrine” recalibrates Indian arbitration law on joinder:

• Doctrinal Clarity – Separates procedural pre‑conditions (notice, appointment) from jurisdictional essentials (consent).
• Tribunal‑Centric Approach – Empowers arbitral tribunals to decide multi‑party disputes efficiently, reducing premature court interventions.
• Reduction in Tactical Challenges – Parties can no longer deploy service‑of‑notice technicalities to avoid arbitration if they are substantively bound.
• Guidance for Drafting & Strategy – Transaction counsel may draft broader “multi‑party” clauses, knowing tribunals are authorised to bring in necessary stakeholders.
• Harmonisation with International Practice – Aligns India with prevailing transnational norms favouring implied joinder based on consent and composite transactions.

4. Complex Concepts Simplified

• Section 21 Notice – A formal communication by which a claimant says, “I want arbitration.” Its legal function is to:
  1. Mark the starting date for limitation;
  2. Trigger contractual appointment procedures;
  3. Enable a Section 11 court request when the other side does not cooperate.
  It is not a constitutional summons that fixes the universe of parties forever.
• Section 11 Application – A request to the High Court/Supreme Court to appoint an arbitrator when the agreed mechanism fails. The court looks only at whether an arbitration agreement probably exists—nothing more.
• Kompetenz‑Kompetenz (Section 16) – German for “authority over authority”; means the arbitral tribunal decides its own jurisdiction, including whether additional parties can be bound.
• Group of Companies Doctrine – If several companies in one corporate group are intimately involved in negotiation, performance, or termination of a contract containing an arbitration clause, a non‑signatory can be treated as having consented to arbitrate.
• Non‑signatory – An entity that did not physically sign the contract but may still be bound because of its conduct or corporate relationship.

5. Conclusion

Adavya Projects v. Vishal Structurals is a landmark because it re‑centres arbitration around party consent embodied in the arbitration agreement, demoting procedural missteps to curable irregularities. By holding that absence of Section 21 notice or Section 11 joinder does not bar subsequent impleadment, the Court removes a common dilatory tactic and reinforces the tribunal’s autonomy. Practitioners must now focus their objections on the real question—did the alleged party agree, expressly or impliedly, to arbitrate?—rather than on technical stages of the arbitral process. The judgment will likely influence drafting practices, case strategy, and judicial attitudes, further consolidating India’s image as an arbitration‑friendly jurisdiction that prizes substance over form.