Redefining Arbitration’s Boundaries: How India’s Supreme Court Put Substance Over Procedure in Multi-Party Disputes

In a judgment that promises to reshape the contours of Indian arbitration law, the Supreme Court on April 17, 2025, delivered a definitive ruling in Adavya Projects Pvt. Ltd. v. M/S Vishal Structurals Pvt. Ltd. & Ors., affirming that arbitral tribunals possess the authority to implead non-signatories to arbitration agreements even in the absence of formal procedural prerequisites such as Section 21 notices or specific inclusion in Section 11 proceedings.

The Court’s ruling reasserts the foundational principle of party consent, not as a matter of mere form, but one discernible through substantive conduct and contractual engagement.

In doing so, the judgment reinforces a pragmatic, commercial reading of arbitration law one that elevates consent and context over ritualistic formality.

What's The Matter?

The dispute had its genesis in a partnership forged for an oil and gas infrastructure venture. Adavya Projects, the appellant, had allied with Vishal Structurals to form a Limited Liability Partnership (LLP), which was to execute the project.

The third respondent, CEO of the LLP, was allegedly at the helm of operational and financial decisions.

When disputes arose over alleged financial mismanagement, Adavya invoked the arbitration clause (Clause 40) in the LLP Agreement a broadly framed clause extending to partners, the LLP, and its administrators.

However, when Adavya sought to bring both the LLP and its CEO into the arbitral proceedings, the tribunal declined,

citing the absence of a Section 21 notice and their non-inclusion in the Section 11 application.

What Happened in Court?

The Delhi High Court upheld this procedural stance. The Supreme Court, however, took a sharply different view, reinstating the tribunal’s power to bring all relevant parties into the arbitral fold.

At the heart of the Court’s reasoning was a clarion call against procedural rigidity.

A Section 21 notice meant to demarcate the commencement of arbitral proceedings for the purposes of limitation and choice of law was held not to be a sine qua non for impleadment.

The Court clarified that failure to serve such notice does not ipso facto preclude a party from being bound by an arbitration agreement,

especially where the underlying contract and the nature of disputes suggest implied consent.

The absence of procedural notice cannot override substantive contractual obligations.

The Court also delineated the scope of a Section 11 application. It held that the appointment of arbitrators by courts under Section 11 entails only a prima facie review not a conclusive determination of jurisdiction or party identity.

This role is left to the arbitral tribunal under the principle of kompetenz-kompetenz, which allows the tribunal to rule on its own jurisdiction, including the question of whether additional parties fall within the scope of the arbitration agreement.

Crucially, the Court reaffirmed that consent to arbitration need not always be explicit; it can arise through conduct, particularly when a non-signatory performs obligations under the contract, exercises rights, or assumes a significant role in its execution.

This flows from the Group of Companies doctrine, previously recognized in Indian jurisprudence, whereby entities closely related to signatories may be deemed bound if the parties intended for them to be covered.

In this case, the LLP and its CEO were directly implicated in the contract’s performance and dispute, and Clause 40 explicitly contemplated their inclusion.

The tribunal was, therefore, justified in exercising jurisdiction over them.

The implications of this ruling for arbitration practice are immediate and far-reaching.

First, it compels greater precision in drafting arbitration clauses. Entities forming joint ventures, SPVs, or multi-party commercial arrangements must ensure that their dispute resolution clauses unambiguously include affiliates, administrators, or any party materially involved in performance.

Second, it provides tribunals with procedural latitude to bring essential actors into the arbitration even after commencement thus enabling holistic resolution of disputes without multiplicity of proceedings.

Third, the judgment echoes the Supreme Court’s approach in Cox and Kings Ltd. v. SAP India (2024), consolidating a line of authority that privileges consensual engagement over hyper-technical objections.

Finally, it signals a cautionary note to commercial actors: those who assume a role in contract performance may find themselves bound to arbitral proceedings even without a signature.

In sum, Adavya Projects represents yet another milestone in India’s maturing arbitration landscape one that increasingly emphasizes substance over form and coherence over fragmentation.

By allowing tribunals to draw non-signatories into proceedings based on demonstrated contractual involvement and implied consent, the Supreme Court has fortified the autonomy of arbitral tribunals and reaffirmed India’s commitment to a robust and efficient arbitration regime.

The decision not only streamlines multi-party disputes but also places the onus on parties to navigate their contractual relationships with foresight and clarity.