Section 21 Arbitration Act | Procedural Non-Compliance in Notice Does Not Invalidate Arbitration Invocation : Bombay HC Upholds Party Autonomy

The Bombay High Court's recent judgment in Unistar Metals Private Limited v. GE Power Limited clarifies a critical aspect of arbitration law: the validity of a Section 21 notice under the Arbitration and Conciliation Act, 1996 (the Act) even when it does not strictly adhere to the procedural requirements of the arbitration agreement. The Court held that the primary purpose of a Section 21 notice is to commence arbitral proceedings, and non-compliance with procedural formalities - such as suggesting a sole arbitrator instead of a three-member tribunal - does not invalidate the notice. This ruling reinforces the principle that the contents of a Section 21 notice do not restrict the scope of claims or the jurisdiction of the arbitral tribunal.

Background & Facts

The Dispute

The dispute arose from a Purchase Order dated 25th March 2019, issued by the respondent, GE Power Limited, to the applicant, Unistar Metals Private Limited, for the supply of 2,52,926.62 kgs of ESP Cold Roof materials at a total contract value of Rs. 2,15,52,322.35. The Purchase Order incorporated the G.E. Power Terms of Purchase Rev-A-India, which included Clause 20.2, an arbitration clause mandating that disputes be resolved under the Rules of the Delhi International Arbitration Centre (DIAC) by a three-member arbitral tribunal. The clause further stipulated that the competent courts at the place of the registered office of the Buyer (Mumbai) would have exclusive jurisdiction over the implementation of arbitral awards.

Key Facts

• 25.03.2019: Purchase Order issued by the respondent to the applicant for supply of materials.
• 09.09.2024: The applicant issued a notice under Section 21 of the Act, invoking the arbitration clause and proposing the appointment of a sole arbitrator.
• 17.10.2024: The respondent replied to the arbitration notice, refusing to concur in the appointment of an arbitrator and raising an objection regarding limitation.
• 20.01.2026: The applicant filed an application under Section 11 of the Act before the Delhi High Court, which was subsequently withdrawn due to a jurisdictional objection raised by the respondent.
• Post-20.01.2026: The present Arbitration Application (L) No. 15413 of 2026 was filed before the Bombay High Court.

Procedural History

• 20.01.2026: Section 11 application filed before the Delhi High Court.
• Withdrawal: The application was withdrawn after the respondent objected to the jurisdiction of the Delhi High Court.
• Present Application: Filed before the Bombay High Court on the ground that the registered office of the Buyer (respondent) is within its jurisdiction.

The Parties' Positions

For the Applicant

The applicant contended that the Bombay High Court has jurisdiction to entertain the Section 11 application, as the registered office of the Buyer (respondent) is situated in Mumbai. The applicant relied on the second part of Clause 20.2, which grants exclusive jurisdiction to the courts at the place of the Buyer's registered office for the implementation of arbitral awards. The applicant further argued that the DIAC Rules are procedural and do not override the jurisdiction of the referral court under Section 11 of the Act.

For the Respondent

The respondent raised three primary objections:

1. Invalid Invocation of Arbitration: The respondent argued that the Section 21 notice dated 09.09.2024 was invalid because it proposed the appointment of a sole arbitrator, contrary to the three-member tribunal stipulated in Clause 20.2. The respondent contended that the notice unilaterally altered the agreed procedure, rendering it legally unsustainable.

2. Non-Compliance with DIAC Rules: The respondent submitted that the DIAC Rules prescribe a comprehensive procedure for invoking arbitration and constituting the arbitral tribunal. The applicant failed to comply with Rule 4 (Request for Arbitration) and Rule 8.5 (Appointment of Three Arbitrators), which mandate approaching the DIAC before invoking arbitration. The respondent argued that the applicant prematurely filed the Section 11 application without exhausting the agreed procedure.

3. Absence of Dispute: The respondent contended that no dispute existed between the parties, as the applicant had failed to supply goods conforming to the Purchase Order's specifications. Consequently, the respondent rejected the goods and did not raise any invoice, eliminating any obligation to remit payment. Thus, the respondent argued that no arbitrable dispute had arisen.

Relief Sought

The applicant sought the appointment of an arbitrator under Section 11(6) of the Act to adjudicate the disputes arising from the Purchase Order dated 25.03.2019.

The Legal Issue

The central legal questions before the Court were:

1. Whether the Section 21 notice issued by the applicant was invalid due to its non-compliance with the arbitration agreement (proposing a sole arbitrator instead of a three-member tribunal).
2. Whether the applicant was required to approach the DIAC before invoking the arbitration clause under Section 21 of the Act.
3. Whether the failure to suggest three arbitrators in the Section 21 notice rendered the notice defective, and what are the consequences thereof.

Arguments Presented

For the Applicant

The applicant's counsel relied on the following judgments to support their contentions:

• M/s Magnolia Glass Private Limited v. Pernod Ricard India Private Limited (Delhi High Court, Order dated 09.10.2025 in ARBP/939/2025): The Court held that DIAC Rules are procedural and do not interfere with the jurisdiction of the referral court under Section 11 of the Act.
• Office for Alternative Architecture v. Ircon Infrastructure (2025 SCC Online SC 1098): The Supreme Court emphasized that institutional rules cannot override statutory provisions under the Act.
• Arif Azim Company Ltd. v. Aptech Ltd. ((2024) 5 SCC 313): The Court reiterated that party autonomy in arbitration agreements must be balanced with statutory provisions.
• Bhagheeratha Engineering Ltd. v. State of Kerala (2026 SCC OnLine SC 5): The Supreme Court held that the object of Section 21 is limited to commencing arbitral proceedings and does not restrict the scope of claims before the arbitral tribunal.

The applicant argued that once the agreed procedure under Clause 20.2 failed, the Bombay High Court had the jurisdiction to appoint an arbitrator under Section 11(6) of the Act. The counsel further submitted that the venue of arbitration (New Delhi) was distinct from the seat of arbitration (Mumbai), and the latter determined the jurisdiction of the Court.

For the Respondent

The respondent's counsel relied on the following arguments and authorities:

• Judgment of the Bombay High Court in Arohi Infrastructure & Ors. v. Tata Capital Financial Services Limited (2015 SCC OnLine Bom 5883): The Court held that an arbitration application based on a defective Section 21 notice is not maintainable.
• DIAC Rules: The respondent emphasized that Rule 4 and Rule 8.5 of the DIAC Rules prescribe a mandatory procedure for invoking arbitration and constituting the arbitral tribunal. The applicant's failure to comply with these rules rendered the Section 21 notice invalid.
• Party Autonomy: The respondent argued that the procedure agreed upon by the parties for constituting the arbitral tribunal is binding and cannot be unilaterally altered. The applicant's notice, proposing a sole arbitrator, disregarded the agreed mechanism and was thus legally impermissible.

The respondent further contended that the Section 21 notice was a condition precedent for invoking the Court's jurisdiction under Section 11 of the Act, and the applicant's failure to adhere to the agreed procedure deprived the Court of jurisdiction.

The Court's Analysis

The Court undertook a detailed examination of the purpose and scope of Section 21 of the Act, relying extensively on Supreme Court precedents to resolve the dispute. The analysis can be distilled into the following key points:

Purpose of Section 21 Notice

The Court relied on the Supreme Court's judgment in Bhagheeratha Engineering Ltd. v. State of Kerala, which held that:

"The object of Section 21 of the Act is only for the purpose of commencement of arbitral proceedings. Section 21 is concerned only with determining the commencement of the dispute for the purpose of reckoning limitation. There is no mandatory prerequisite for issuance of a Section 21 notice prior to the commencement of Arbitration. Issuance of a Section 21 notice may come to the aid of parties and the arbitrator in determining the limitation for the claim. Failure to issue a Section 21 notice would not be fatal to a party in Arbitration if the claim is otherwise valid and the disputes arbitrable."

The Court further quoted the Supreme Court's observations in Adavya Projects Private Limited v. Vishal Structurals Private Limited and Others ((2025) 9 SCC 686), which clarified that:

"The purpose of the Section 21 notice is clear - by fixing the date of commencement of arbitration, it enables the calculation of limitation and it is a necessary precondition for filing an application under Section 11 ACA. The other purposes served by such notice - of informing the respondent about the claims, giving the respondent an opportunity to admit and contest claims and raise counterclaims, and to object to proposed arbitrators - are only incidental and secondary."

Validity of the Section 21 Notice

The Court held that the Section 21 notice issued by the applicant, though proposing a sole arbitrator, was valid for the following reasons:

1. Primary Purpose of Notice: The primary purpose of the Section 21 notice is to commence arbitral proceedings and determine the limitation period. The notice fulfilled this purpose by invoking the arbitration clause and specifying the disputes between the parties.

2. Non-Restrictive Nature of Notice: The Court emphasized that the contents of the Section 21 notice do not restrict the scope of claims that can be raised before the arbitral tribunal. Any objections regarding limitation or maintainability can be raised before the arbitral tribunal itself.

3. Incidental Functions: The secondary functions of the Section 21 notice - such as informing the respondent of the claims, providing an opportunity to contest, and objecting to arbitrators - are incidental and do not invalidate the notice if not strictly complied with.

4. Jurisdiction of the Court: The Court observed that the failure to constitute the arbitral tribunal as per the agreed procedure invoked its jurisdiction under Section 11(6) of the Act. The Bombay High Court, being the court of the seat, had the authority to appoint an arbitrator.

DIAC Rules and Jurisdiction

The Court addressed the respondent's argument that the applicant ought to have approached the DIAC before invoking arbitration. The Court held that:

• The DIAC Rules are procedural and do not override the statutory provisions of the Act.
• The applicant's failure to exhaust the DIAC procedure did not deprive the Court of jurisdiction, as the respondent had already resisted the appointment of an arbitrator on the ground of limitation.
• The seat of arbitration (Mumbai) determined the jurisdiction of the Court, and the venue (New Delhi) was a separate consideration.

Consequences of Defective Notice

The Court distinguished the present case from Arohi Infrastructure & Ors. v. Tata Capital Financial Services Limited, where the Section 21 notice was held to be invalid due to non-compliance with the arbitration agreement. In the present case, the Court held that:

• The Section 21 notice, though defective in suggesting a sole arbitrator, validly invoked the arbitration clause and commenced arbitral proceedings.
• The respondent's failure to suggest three arbitrators or object to the sole arbitrator on procedural grounds did not invalidate the notice.
• The dispute persisted, and the notice under Section 21 had not resulted in the appointment of the arbitral tribunal, thereby invoking the Court's jurisdiction under Section 11(6).

The Verdict

The Bombay High Court allowed the Arbitration Application and appointed Smt. Anuja Prabhudessai, Former Judge of the Bombay High Court, as the sole arbitrator to adjudicate the disputes between the parties. The Court issued the following directions:

1. Appointment of Arbitrator: Smt. Anuja Prabhudessai was appointed as the sole arbitrator, with her contact details provided in the order.
2. Communication of Order: The applicant was directed to communicate a copy of the order to the arbitrator within one week of its uploading.
3. Venue of Arbitration: The venue of arbitration was to be governed by the provisions of the agreement or as agreed between the parties.
4. Disclosure Statement: The arbitrator was requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the applicant's advocates for filing in the Court's Registry.
5. Appearance Before Arbitrator: The parties were directed to appear before the arbitrator on the date and place indicated by her to obtain directions regarding the conduct of arbitration, including schedules for pleadings, examination of witnesses, and hearings.
6. Valid Email Addresses: The parties were required to provide valid and functional email addresses of their respective advocates to the arbitrator for valid service of correspondence.
7. Arbitral Costs: The arbitral costs and fees were to be borne equally by the parties in the first instance, subject to any final award on costs by the arbitrator.

The Court expressly kept all contentions of the parties open to be raised before the arbitrator.

What This Means For Similar Cases

Section 21 Notice: Substance Over Form

The judgment reinforces the principle that the validity of a Section 21 notice depends on its substance rather than strict compliance with procedural formalities. Practitioners should note:

• A Section 21 notice is valid if it invokes the arbitration clause and specifies the disputes, even if it does not strictly adhere to the agreed procedure (e.g., proposing a sole arbitrator instead of a three-member tribunal).
• The primary purpose of the notice is to commence arbitral proceedings and determine the limitation period, not to restrict the scope of claims or dictate the constitution of the arbitral tribunal.

Jurisdiction of the Referral Court

The Court clarified that the jurisdiction of the referral court under Section 11 of the Act is not ousted by institutional rules such as the DIAC Rules. Key takeaways include:

• The seat of arbitration determines the jurisdiction of the Court, not the venue specified in the arbitration agreement.
• The failure to exhaust institutional procedures does not deprive the Court of jurisdiction if the respondent resists the appointment of an arbitrator on other grounds (e.g., limitation).
• The referral court retains the power to appoint an arbitrator under Section 11(6) if the agreed procedure fails.

Procedural Compliance and Party Autonomy

While the judgment emphasizes flexibility in procedural compliance, it also underscores the importance of party autonomy in arbitration agreements. Practitioners should consider:

• Party autonomy is not absolute and must be balanced with statutory provisions under the Act.
• Institutional rules (e.g., DIAC Rules) are procedural and cannot override the jurisdiction of the referral court under Section 11.
• Non-compliance with agreed procedures may not invalidate the Section 21 notice, but parties should adhere to the agreed mechanism to avoid disputes over jurisdiction.

Practical Implications for Arbitration Proceedings

• Drafting Section 21 Notices: Parties should clearly invoke the arbitration clause and specify the disputes, but need not strictly comply with procedural formalities (e.g., suggesting three arbitrators) if the primary purpose of commencing proceedings is achieved.
• Responding to Section 21 Notices: Respondents should raise objections to procedural non-compliance at the earliest opportunity to avoid waiving such objections.
• Approaching the Referral Court: If the agreed procedure for appointing arbitrators fails, parties can directly approach the referral court under Section 11(6) without exhausting institutional mechanisms.
• Venue vs. Seat: The venue of arbitration (e.g., New Delhi) is distinct from the seat of arbitration (e.g., Mumbai), which determines the jurisdiction of the Court.