Section 21
Commencement of Arbitral Proceedings
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.
This provision establishes a clear starting point for arbitration, which has several legal and procedural consequences. The commencement date is significant for determining the limitation period under the Limitation Act, 1963, and influences other procedural aspects, such as interim relief and jurisdictional challenges.
The section emphasizes that the arbitral process formally begins when the respondent receives the request for arbitration. No specific format is mandated for such a request, but it should clearly communicate the claimant’s intention to initiate arbitration. The receipt of notice can be established through various means, such as email, courier, or other documented communication. A proper interpretation of Section 21 of the Act leads to the inescapable conclusion that, in the absence of an agreement to the contrary, a notice under Section 21 of the Act by the claimant, invoking the arbitration clause prior to referring the disputes to arbitration, is mandatory. In other words, without such notice, the initiation of arbitration proceedings would be legally unsustainable.
The Hon’ble Bombay High Court in the case of D.P. Construction v. Vishvaraj Environment Pvt. Ltd. 2022 SCC Online Bom 1410 observed:
“Considering the position of law as clarified by this Court in the case of Malvika Rajnikant Mehta v. JESS Construction (supra) and the Delhi High Court in the case of Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd. (supra) pertaining to the purposes that a notice invoking arbitration under section 21 of the said Act serves, with which this Court is in agreement, the notice invoking arbitration ought to be absolutely clear with reference to the arbitration clause and with clear intent of calling upon the rival party to proceed for appointment of an Arbitrator and referring the disputes to arbitration. The words in section 21 of the said Act, as regards commencement of arbitral proceedings specifically refer to a request for the dispute to be referred to arbitration. Hence, unless there is a request by a party that the dispute is to be referred to arbitration, merely stating the claims and disputes in the notice would not suffice.”
Section 43(2) of the Arbitration and Conciliation Act, 1996, stipulates that, for the purposes of Section 43 of the Act and the Limitation Act, 1963, arbitration proceedings shall be deemed to commence on the date specified in Section 21. As per Section 21, unless the parties have agreed otherwise, arbitral proceedings concerning a particular dispute commence on the date when the respondent receives a request for arbitration. Consequently, the limitation period ceases to run once the respondent receives such a notice from the claimant.
Conclusion
Section 21 of the Arbitration and Conciliation Act, 1996, is a pivotal provision that not only defines the commencement of arbitration but also significantly impacts the limitation period for claims. Ensuring clarity in initiating arbitral proceedings provides certainty to parties and safeguards their rights against procedural delays. Judicial interpretations have reinforced its importance, making it essential for legal practitioners and contracting parties to adhere to its requirements.
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