Notice Under Section 21 is Procedural and Does Not Limit the Jurisdiction of the Arbitral Tribunal

The Applicant, Unistar Metals, filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 ("the Act") following a dispute arising from a Purchase Order dated March 25, 2019, for the supply of ESP Cold Roof materials.

Clause 20.2 of the agreement provided for arbitration under the Rules of the Delhi International Arbitration Centre (DIAC) by three arbitrators, with the place of arbitration in New Delhi, while granting exclusive jurisdiction to the courts where the "Buyer" (Respondent) has its registered office.

The Applicant invoked arbitration via a Section 21 notice on September 9, 2024, proposing a sole arbitrator.

The Respondent resisted the notice on grounds of limitation and procedural non-compliance.

An initial application before the Delhi High Court was withdrawn after the Respondent raised a jurisdictional objection, leading to the present filing in Mumbai.

1. Whether the Section 21 invocation notice was invalid for proposing a sole arbitrator when the agreement mandated a three-member tribunal.

2. Whether it is a mandatory prerequisite for a party to approach the DIAC for the appointment of an arbitrator before filing a Section 11 application in Court.

3. Whether the Bombay High Court has the jurisdiction to appoint the arbitrator given the "exclusive jurisdiction" clause in favour of the Buyer’s registered office.

The Court primarily applied Section 11(6) and Section 21 of the Arbitration and Conciliation Act, 1996.

Section 21 is a procedural mechanism for reckoning limitation and informing the respondent of claims, rather than a jurisdictional bar, as established in Bhagheeratha Engineering Ltd. v. State of Kerala and Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd.

Institutional rules (like DIAC) are procedural and do not override the referral court’s power to appoint an arbitrator when the agreed mechanism fails, as held in M/s Magnolia Glass Pvt. Ltd. v. Pernod Ricard India Pvt. Ltd.

The Court reasoned that the primary purpose of a Section 21 notice is time-related (limitation) and to provide notice of the dispute; secondary defects, such as proposing a sole arbitrator instead of three, do not render the invocation fatal.

Since the Respondent refused to concur in the appointment and contested the claims as time-barred, the agreed appointment procedure failed, triggering the Court’s jurisdiction under Section 11(6).

Regarding the institutional rules, the Court held that while the DIAC Rules provide a framework, the Respondent’s failure to respond to the invocation necessitated judicial intervention.

On jurisdiction, the Court found that Clause 20.2 specifically vested "exclusive jurisdiction" in the courts of the Buyer’s registered office (Mumbai); therefore, despite New Delhi being the designated "place" (venue), the Mumbai seat was established by the parties' contractual intent.

The Court appointed Smt. Anuja Prabhudessai (Former Judge, Bombay HC) as the sole Arbitrator to adjudicate the disputes, granting parties liberty to address specific venue and procedure (DIAC Rules) before the Arbitrator.