Failure to issue a Section 21 notice does not bar Section 11 referral where arbitration agreement prima facie exists.

M/s Shelatkar Construction Pvt. Ltd. engaged M/s Texas Resources Pvt. Ltd. for development of a commercial complex at Sainik Colony, Jammu.

Texas Resources subsequently allotted part of the work to M/s Winner Construction Pvt. Ltd. through a Letter of Intent dated 28 July 2010, which provided that the terms and conditions would be as per the contract/tender documents of Shelatkar Construction Pvt. Ltd.

Texas Resources claimed that Shelatkar Construction owed it approximately ₹3,07,74,534 and sought appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, after issuing a notice dated 3 October 2015.

Winner Construction separately sought appointment of an arbitrator against Texas Resources.

1. Whether an arbitration agreement existed between Texas Resources Pvt. Ltd. and Shelatkar Construction Pvt. Ltd., and whether Texas had validly invoked the arbitration clause?

2. Whether the Letter of Intent dated 28 July 2010 incorporated the arbitration clause contained in the agreement between Shelatkar Construction Pvt. Ltd. and Texas Resources Pvt. Ltd. into the contractual relationship between Texas and Winner Construction Pvt. Ltd.?

3. Whether the absence of a notice specifically invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996, was fatal to Winner Construction’s Section 11 petition?

4. Whether the Section 11 petitions were instituted by duly authorised representatives?

The Court applied Sections 7(5), 11(6), 16, 21 and 23 of the Arbitration and Conciliation Act, 1996.

Under Section 7(5), a reference to another document containing an arbitration clause constitutes an arbitration agreement only where the reference is such as to make the arbitration clause part of the contract.

At the Section 11 stage, the Court’s inquiry is confined to the prima facie existence of an arbitration agreement, and courts should generally follow the principle “when in doubt, do refer,” leaving jurisdictional objections to the arbitral tribunal under Section 16.

The Court relied on Hirani Developers v. Nehru Nagar Samruddhi CHS Ltd., 2026 INSC 484, and Shinhan Bank v. Carol Info Services Ltd., (2023) 20 SCC 388, for the principle that incorporation of an arbitration clause may arise from an express and comprehensive incorporation of the terms of an earlier agreement.

Regarding Section 21, the Court relied on Bhagheeratha Engineering Ltd. v. State of Kerala, (2026) 5 SCC 758, and ASF Buildtech (P) Ltd. v. Shapoorji Pallonji & Co. (P) Ltd., (2025) 9 SCC 686, for the proposition that a Section 21 notice primarily determines the commencement of arbitration and limitation, and its absence is procedural rather than a bar to the existence of arbitral jurisdiction.

In AA No. 41/2015, the Court found that Clause 44 of the General Conditions of Contract contained an arbitration clause and that Texas had invoked it through its notice dated 3 October 2015.

The objection based on the alleged lack of authority of Mr. Naveen Anand failed because the Board Resolution expressly authorised him to institute petitions and conduct litigation in Jammu & Kashmir; moreover, Shelatkar had not established the authority of the person who filed its reply.

In AA No. 31/2014, although the Letter of Intent did not reproduce the arbitration clause, Clause “E” provided that “all terms and conditions” would be as per Shelatkar’s contract/tender documents.

Applying the limited prima facie standard under Section 11 and the principle that doubtful cases should ordinarily be referred to arbitration, the Court held that it could not conclusively reject the existence of an arbitration agreement at the referral stage.

Whether the clause was in fact incorporated, and whether it was binding upon Winner and Texas, was left for determination by the arbitrator under Section 16.

The demand notice dated 23 September 2013 issued by Winner was not a proper notice expressly invoking arbitration.

Nevertheless, relying on the cited Supreme Court authorities, the Court held that the defect did not warrant dismissal of the Section 11 petition because Section 21 is principally concerned with the commencement of arbitral proceedings and limitation, rather than constituting the source of the tribunal’s jurisdiction.

It held that a prima facie arbitration agreement existed between Texas Resources and Shelatkar and that the dispute between Texas Resources and Winner also required reference to arbitration, with the ultimate questions concerning incorporation, existence or validity of the arbitration agreement left open for determination by the arbitral tribunal.

Mr. Justice V.C. Koul, former Judge of the Court, was appointed as the sole arbitrator to adjudicate the disputes in both petitions.

The parties were permitted to submit their claims and counterclaims and to raise all permissible objections, including objections concerning the existence or validity of the arbitration agreement.

The arbitrator’s fee was directed to be governed by Schedule IV of the Arbitration and Conciliation Act, 1996.