Arbitration is a popular and efficient method for resolving commercial disputes outside the traditional court system. But how does this process actually begin? It all starts with a crucial legal document known as an Arbitration Notice—governed by Section 21 of the Arbitration and Conciliation Act, 1996.

In this article, we will explore:

• What is an Arbitration Notice?
• When and how should it be sent?
• What are the essential components of a valid notice?
• What precautions should be taken while sending it?
• The importance of this notice in terms of legal proceedings and limitation.
• Key judicial precedents interpreting Section 21.

Understanding Arbitration

Before diving into the notice, let’s briefly revisit what arbitration is. Arbitration is a form of alternative dispute resolution (ADR) where parties agree to refer their dispute to a neutral third party, known as an Arbitrator, instead of going to court.

This method is faster, more cost-effective, and confidential compared to litigation. Arbitration can only take place if there is an existing Arbitration Agreement between the parties, either as a clause in the main contract or as a separate agreement.

What is an Arbitration Notice under Section 21?

According to Section 21 of the Arbitration and Conciliation Act, 1996:

"Unless otherwise agreed by the parties, the 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."

In simpler terms:

An Arbitration Notice is a formal communication from one party to the other, stating that they are invoking the Arbitration Clause to refer the existing dispute to arbitration. This notice marks the official commencement of arbitral proceedings and plays a vital role in calculating the Limitation Period.

How to Send an Arbitration Notice?

Sending the notice involves more than just delivering a letter. You must:

• Identify the correct parties to whom the notice should be addressed. Missing any necessary party may weaken your claim.
• Ensure proof of delivery, whether by registered post, courier, or email.
• Understand that group entities may need to be notified depending on the structure of the agreement (e.g., in MTNL v. Canara Bank, 2020, the “Group of Companies” doctrine was recognized).

Key Components of a Valid Arbitration Notice

A valid and effective arbitration notice should include the following four major components:

1. Reference to the Arbitration Agreement

• Clearly mention that there is an existing Arbitration Agreement between the parties.
• Provide details such as the date of the agreement, clause number, and a brief extract of the arbitration clause.
• Example:

“Parties have entered into an agreement dated 01.01.2023 containing an arbitration clause under Clause 12, which provides for reference of disputes to arbitration.”

2. Brief Description of the Dispute

• Clearly state what the dispute is about:
  o    Non-payment of dues?
  o    Breach of contract?
  o    Deficiency in services?
• The description should be concise but precise, as this is not a claim petition but a notice of intent.
• Example:

“Despite repeated requests, the payment of ₹5,00,000/- against invoice no. XYZ dated 10.03.2023 has not been made, which constitutes a breach of contract.”

3. Proposal for Appointment of Arbitrator (Optional but Advisable)

• You may propose the name of an Arbitrator in the notice:
  “We hereby propose the name of Mr. ABC, Advocate and Arbitrator, to act as the Sole Arbitrator in the matter. Kindly convey your consent or objection within 15 days.”
• If the other party does not agree or fails to respond, the party may move to the High Court or Supreme Court under Section 11 for the appointment of an Arbitrator.

4. Request for Response and Legal Consequences

• Clearly specify a time limit (usually 15 days) for the other party to respond.
• Mention that in the absence of a response, legal steps for the appointment of an Arbitrator will be initiated.
• Example:
  “You are requested to respond to this notice within 15 days from the date of receipt, failing which we shall be constrained to initiate proceedings for appointment of Arbitrator under Section 11 of the Act.”

Significance of an Arbitration Notice

• Triggers the arbitration process officially under law.
• Suspends or stops the Limitation Period from running further.
• Ensures compliance with the procedure set out under Section 21.
• Serves as evidence that the disputing party attempted resolution through arbitration first.

Judicial Precedents on Section 21

Let’s review some important judgments that highlight the critical role of an Arbitration Notice:

🔹 DDA v. Durga Construction Co. (2013) 1 SCC 349

The Supreme Court held that absence of a Section 21 notice means that arbitration proceedings have not legally commenced. A valid notice is mandatory.

🔹 Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd. (2017) SCC OnLine Del 7228

The Delhi High Court recognized that emails can be a valid medium of delivering the arbitration notice, provided receipt can be proven.

🔹 State of Goa v. Praveen Enterprises (2012) 12 SCC 581

The Court clarified that Section 21 applies only to the initial dispute. For additional disputes added later, a new notice is not required.

🔹 BSNL v. Nortel Networks (2021) 5 SCC 738

The Supreme Court warned that delayed arbitration notices can lead to dismissal of the claim under Limitation Act. Section 137 of the Limitation Act applies.

🔹 Voltas Ltd. v. Rolta India Ltd. (2014) SCC OnLine Bom 1929

The Bombay High Court held that if a suit is filed without serving an Arbitration Notice, despite the existence of an arbitration clause, the suit will not be maintainable.

Conclusion

An Arbitration Notice under Section 21 may appear to be a minor procedural step, but it forms the foundation of any arbitration proceeding. Without it, the entire process may fall apart due to technical and legal objections. It is crucial to:

• Draft the notice carefully,
• Address it to the correct parties,
• Include all key details, and
• Maintain evidence of delivery.

Remember: A properly drafted Arbitration Notice does not just inform the other party—it protects your legal rights, starts the limitation clock, and sets the arbitration machinery in motion.

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