Source: Delhi High Court 

Why in News? 

A bench of Justice Jyoti Singh held that mere inaction by a party called upon by the other one to act, cannot lead to an inference as to implied consent or acquiescence of such party to such appointment of the Arbitrator.  

• The Delhi High Court held this in the case of M/s Supreme Infrastructure India v. Freyssinet Mermad India Pvt. (2025). 

What was the Background of M/s Supreme Infrastructure India v. Freyssinet Mermad India Pvt. (2025) Case?   

• The Petitioner, a non-government public company engaged in construction, was awarded a project on 15th October 2012 to construct an additional office complex for the Supreme Court near Pragati Maidan, New Delhi. 
• On 6th February 2013, the Petitioner issued a Work Order to the Respondent for the design, supply, and installation of pre-stressed sil anchors. 
• The address provided by the Petitioner in the Work Order was “Supreme City, Hiranandani Complex, Near Chitrath Studio Powai, Mumbai, 400076.” 
• On 24th July 2014, the Central Public Works Department (CPWD) terminated the contract with the Petitioner. 
• The Work Order included a dispute resolution clause stipulating arbitration under Indian law, with the arbitration seat at New Delhi. 
• The Respondent allegedly invoked arbitration by sending a notice under Section 21 of the Arbitration and Conciliation Act, 1996 (A & C Act), and unilaterally appointed a Sole Arbitrator. 
• The Petitioner claims it never received the Section 21 notice or any communication from the Arbitrator and was therefore unaware of the arbitral proceedings. 
• An ex parte arbitral award was passed on 15th March 2016, but a signed copy of the award was allegedly never delivered to the Petitioner. 
• In 2019, the Respondent filed an execution petition (No. 566/2019) before the Bombay High Court, which was withdrawn on 27th October 2021 due to non-payment of stamp duty. 
• A second execution petition (Commercial Execution No. 14691/2022) was refiled after stamp duty payment but was again withdrawn on 17th October 2022, citing an erroneous belief that the Petitioner was under liquidation. 
• On 10th April 2024, the Respondent filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, before the NCLT, Mumbai. 
• The Petitioner became aware of the arbitral proceedings and award only upon receiving an email from NCLT dated 28th June 2024 attaching a copy of the IBC petition. 
• The Petitioner asserts that the arbitral proceedings and award are invalid due to lack of notice under Section 21, unilateral appointment of the Arbitrator, and non-receipt of the signed arbitral award.

What were the Court’s Observations? 

• The Court held that the delivery of the signed award is not a mere formality; it initiates crucial limitation periods for filing applications under Sections 33 and 34 of the Act. 
• In Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd. (2017), the Court stressed that arbitration proceedings commence only when the respondent receives a notice under Section 21 requesting reference of the dispute to arbitration. 
• The notice serves to inform the respondent of the claims, potentially narrowing or resolving disputes before arbitration, thereby playing a critical role in the arbitral process. 
• The courts have held that appointing an arbitrator unilaterally, without consent or proper invocation of the arbitration clause, violates Section 21 and is legally untenable. 
• Even before the 2015 amendment to Section 12(1), it was settled law that arbitration requires mutual consent (consensus ad idem), and any unilateral appointment is void. 
• The judgment in Vineet Dujodwala v. State of NCT of Delhi (2024) confirmed that a unilateral appointment of an arbitrator is enough to nullify the award, regardless of other procedural defects. 
• In Lt. Col. H.S. Bedi (Retd) v. STCI Finance Limited (2020) the Court held that a party’s failure to respond to a Section 21 notice does not amount to implied consent for unilateral appointment; the correct route is approaching the Court under Section 11. 
• The Court finally held that owing to the lack of a valid Section 21 notice, the unilateral appointment of the arbitrator, and non-delivery of the signed award, the arbitral award dated 15th March 2016 be set aside. 
• In Benarsi Krishna Committee and Others v. Karmyogi Shelters Private Limited, (2012) 9 SCC 496, the Supreme Court held that ‘party to arbitration’ proceedings means party to the arbitration agreement and if the copy of the signed award is not delivered to the party, it would not amount to compliance with provisions of Section 31(5) of the 1996 Act, a provision which deals with form and content of the arbitral award. 
• From a reading of the aforementioned judgments, it is clear that delivery of an arbitral award under Section 31(5) is not an empty formality and as it is only after the stage under Section 31 has passed that the stage of termination of arbitral proceedings under Section 32 arises and receipt by the party of the award then sets in motion several periods of limitation such as for an application for correction under Section 33(1) and application for setting aside an award under Section 34(3) of the 1996 Act etc. Reading of Section 31(5) of the 1996 Act leaves no trace of doubt that a ‘signed copy’ of the award must be delivered to the ‘party’ to the arbitration agreement. In the present case, signed copy of the award has not been received by the Petitioner till date, an uncontroverted fact, and therefore, limitation period prescribed under Section 34(3) has not commenced. In light of this, it is held that the petition is not barred by limitation 
• It is no longer res integra that arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the Respondent, unless otherwise agreed by the parties. 

What is the Requirement of Notice under Section 21 of A & C Act  ? 

• Section 21 of the Act provides for the requirement of notice under the Act. 
• The important points enumerated are as follows: 
  • Commencement Depends on Request Receipt: Arbitral proceedings begin when the respondent receives a request to refer the dispute to arbitration. 
  • Party Agreement Can Alter Rule: This rule applies unless the parties have mutually agreed on a different date or method for commencement. 
  • Receipt Date is Crucial: The actual date of receipt of the request by the respondent determines when the arbitration officially starts. 

What are the Landmark Judgments on Notice under Section 21 of A & C Act ? 

• Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd. (2017, DHC): 
  • The Court emphasized on the importance and mandate of issuing notice under Section 21 of the Act. 
  • It was held that a plain reading of Section 21 indicates that except where parties have agreed to the contrary, the date of commencement of arbitration proceedings would be the date on which the recipient of the notice receives from the claimant a request for referring the dispute to arbitration. 
  • The object behind the notice is as follows: 
    • Party to the arbitration agreement against whom a claim is made should know what the claims are and it is possible that in response to the notice, the recipient of the notice may accept some claims either wholly or in part and disputes may get narrowed down. 
    • This may help in even resolving the disputes and reference to arbitration could be avoided 
• Shriram Transport Finance Company Limited v. Narender Singh (2022): 
  • The Court held that if no notice is received under Section 21 by the recipient, there is no commencement of arbitral proceedings.