The Arbitrator You Didn’t Choose: Party Equality and Joinder in Adavya Projects
Introduction
Imagine being drawn into arbitration under an agreement you signed, only to discover that the tribunal deciding your rights was already constituted without your knowledge or consent. You never received the notice commencing proceedings, named in Section 11 application, or nominated an arbitrator. Yet, you are told the process is valid because you are ‘party’ to the arbitration agreement.
This scenario is no longer hypothetical. Recently, the Supreme Court in Adavya Projects held that a party to an arbitration agreement may be impleaded in arbitral proceedings even without being served a notice under Section 21 of the Arbitration and Conciliation Act, 1996 (“the Act”) or being named in a Section 11 application for appointment of arbitrator. While the Court’s ruling applies broadly to both signatories and non-signatories, this article confines its analysis to the impact of such impleadment on signatories. This focus is significant because signatories, unlike non-signatories, are presumed to have consented to the entire arbitral process, including tribunal selection, and yet may now be bound by a tribunal they had no role in constituting.
This article argues that exclusion of a party from the stage of constitution of the arbitral tribunal and allowing impleadment at a later stage undermines the fundamental principle of party equality in multi-party arbitrations. The argument proceeds in three steps. First, it analyses Adavya’s reasoning, highlighting its failure to distinguish between signatories and non-signatories despite their differing procedural positions. Second, it examines how excluding a signatory from the tribunal constitution erodes party autonomy and equality, drawing on comparative and institutional practice. Third, it argues that Adavya permits an indirect erosion of rights equivalent to the unilateral appointments struck down in Perkins Eastman, and finally, it proposes post-constitution consent based joinder mechanism as a corrective. The proposed reform is modelled on international institution rules that ensure signatories are never subjected to tribunals they had no role in selecting.
The Holding In Adavya And Its Implications
The dispute in Adavya arose from a contract between Appellant and Respondent No.1. The appellant invoked the arbitration clause by issuing notice u/s 21 only to Respondent 1, and subsequently filed a Section 11 application for appointment of arbitrator, joining only Respondent No. 1. However, after the appointment of the arbitrator, the Appellant impleaded Respondent No. 2 and 3 as well in its statement of claim and amended its prayer. The key issue was whether such impleadment without issuing a Section 21 notice or naming the parties in the Section 11 application was legally sustainable.
The Supreme Court upheld the impleadment. It reasoned that a section 21 notice is necessary to commence arbitral proceedings but mere non-service on a specific party cannot prevent impleadment. It also held that not being parties in the section 11 application will not prevent impleadment at a later stage. The Court read the power to implead within the power of the arbitral tribunal to decide its own jurisdiction. It justified such impleadment in the premise that those impleaded are parties to the arbitration agreement. Thus, the court allowed the impleadment of the respondents despite them not being involved in the selection of the arbitral tribunal.
The distinction that was not made
While the facts of Adavya concerned the impleadment of non-signatories, the Court’s reasoning did not rest on that fact. Instead, the court laid down the broad principle that being a party to the arbitration agreement is the key consideration for impleadment. It adopted a broad formulation and held that if a person is found to be a ‘party’ to the arbitration agreement, it will be determinative for impleadment and exclusion from the appointment process will not vitiate the tribunal’s jurisdiction. ‘Party’ includes both signatories and non-signatories, making this principle applicable to both. Thus, even a signatory can be impleaded post-constitution of the tribunal without being part of the appointment process or being served a notice invoking arbitration.
However, the procedural position of signatories and non-signatories is not the same, and this distinction carries significant legal consequences. For signatories, it is a settled matter that they are parties to the arbitration agreement and their consent to arbitrate is express and undisputed. In contrast, the inclusion of non-signatories requires a determination by the arbitral tribunal itself, through doctrines such as alter ego, implied consent, or group of companies. Post Cox and King and recent decisions like ASF Buildtech, the jurisdictional inquiry into non-signatories is undertaken by the arbitral tribunal itself , i.e., necessarily after the Section 21 notice and Section 11 appointment stage. No such logistical or legal hurdle exists for signatories. Moreover, there is a strong presumption that a signatory, by entering into an arbitration agreement, intended to participate in all core aspects of the arbitral process including the selection of arbitrators. In light of these distinctions, the Court’s removal of the requirement of inclusion in tribunal appointment, without carving out an exception for signatories, raises serious concerns about fairness and procedural equality.
Party Autonomy & The Risk Of Exclusion In Multi-Party Arbitrations
Due to the increasing complexity of commercial transactions, a rising number of arbitration proceedings have developed from just involving one claimant and one respondent to multi-party processes. This makes the issue pressing because the decision in Adavya can lead to a situation where a signatory in a multi-party arbitration does not get the opportunity to be involved in the selection of arbitrators, because it is impleaded later. This will be most pronounced in a situation where the arbitration clause is silent on the appointment procedure and the default mechanism under Section 11(3) for the constitution of a three-member tribunal is operating. In such cases, excluding even one signatory from the appointment stage effectively strips that party of the right to have a say in constituting the arbitral tribunal.
This creates a significant procedural vulnerability in multi-party arbitrations, which are increasingly common. Similar risks may arise in situations like PR Shah, where joint arbitral proceedings were permitted across separate agreements involving a common party.
The presumption that a signatory intends to be a party in the selection of the arbitral tribunal manifests in the interplay of well-established principles of party autonomy and equality in the selection of arbitrators. The autonomy of a party to select its arbitrator, either through a pre-dispute agreement or statutory mechanism, has been recognized as a cornerstone of arbitration.
In fact, empirical studies and institutional surveys confirm that this right to shape the arbitral forum is one of the primary reasons parties choose arbitration over litigation. Consequently, equality in the appointment process is the principal safeguard that ensures this entitlement is meaningful and not illusory.
Adavya’s decision to allow impleadment without being made a party to the arbitrator selection process threatens this fundamental principle of party equality in arbitration. Where a signatory in a multi-party arbitration is impleaded later, it loses its right to participate in the appointment of the arbitral tribunal. The loss of such a right is significant and directly in contravention of the party’s entitlement to choose its arbitrator.
In multi-party arbitrations, the principle of a party’s autonomy in selecting their arbitrator cannot be shortchanged by only two parties representing two sides of the dispute selecting arbitrators. This is because the interests of parties even on the ‘same’ side need not align; in fact, there need not be just two sides to a dispute. There have been situations that substantiate this, most notably in Siemens AG. Here, there were three parties to a dispute with the agreement contemplating a three-arbitrator panel. Dutco initiated arbitration against Siemens and BKMI and nominated its arbitrator. Siemens and BKMI had divergent interests and were reluctant to agree on a common arbitrator to nominate jointly. After losing the arbitration, they challenged the award on the grounds of violation of equality of appointment among parties. The French Court set aside the award because of the principle of equality of parties in the appointment of arbitrators.
The above point of different parties’ entitlement to pick their preferred arbitrator in a multi-party arbitration is further supported by the fact that several factors are considered in selecting an arbitrator. The weight that each party places on these factors differs, thus making each party’s selection criterion unique and informed by their perspective of the dispute.
This issue becomes even more acute due to a statutory gap in the Act. Section 11(3), which governs the appointment of arbitrators in a three-member tribunal, is framed with bilateral disputes in mind. As a result, the Act lacks a mechanism to ensure equal participation of all parties in the tribunal constitution where more than two parties are involved.
A similar gap has been filled in several institutional rules by an affirmation of equality in appointment for all parties post-Dutco. If all parties cannot agree on a panel, then the institution steps in to appoint the tribunal. This process prevents the imposition of an arbitrator on a party and preserves equality among parties. However, even if such an amendment is brought in and an institution is allowed to step in cases of multi-party disputes, the decision in Adavya can allow an evasion of this new procedure for arbitrator selection.
The principle laid down on Adavya will not provide space for such preservation because a signatory can be left out from the selection process, which will prevent the triggering of any amended rule (brought in to preserve equality in a Dutco-like situation) of appointment of the arbitral panel by an institution. This will be followed by the left out signatory being impleaded later by the arbitral tribunal (which should have been selected by the institution but will end being selected by only the two parties who were involved in the section 11 application stage), because a signatory is definitely a part to the arbitration agreement, which is the only requirement as per Adavya.
Thus, there is a need to examine how Indian law treats this principle of equality, and how the Adavya may interact with multi-party disputes both in the absence of legislative safeguards and in their hypothesized presence. Without such engagement, Adavya risks opening the door to uneven procedural outcomes in India’s evolving arbitration landscape.
Cannot Do Indirectly What You Cannot Do Directly: A Skewed Appointment
The principle of equality in selection exists not as a mere formality but as a safeguard to ensure impartiality, independence, and confidence in the arbitration process. This has informed recent court decisions in India, where, through agreement or post-dispute unilateral appointment of arbitrator was in question. In Perkins Eastman, the Supreme Court held that a person who has an interest in the outcome must not have the power to appoint a sole arbitrator and invalidated a clause providing for such unilateral appointment. This has been followed by decisions highlighting that an impartial arbitration cannot happen if the manner in which the arbitral tribunal is constituted is beset by justifiable doubt, and invalidating unilateral appointment clauses.
This shows the unfavourable outlook on arbitration clauses that do not provide all parties an equal opportunity to participate. The lesson of Perkins is that what cannot be done directly through an arbitration clause cannot be achieved indirectly through procedural maneuvers. However, this is precisely the risk created by Adavya. A signatory impleaded after the constitution of the arbitral tribunal loses the opportunity to participate in the selection process.
To prevent this indirect erosion of party autonomy, the principles that inform these decisions must be employed to prevent situations of deprivation of the equality principle for signatories in multi-party arbitrations, which can occur post-Advaya. Signatories cannot be denied their participatory rights merely because they were added late in the process, especially when their status as parties to the arbitration agreement was never in doubt.
A Narrow Corrective To Adavya: Post-Constitution Consent Safeguard For Signatories
As argued hereinabove, the Supreme Court in Adavya announced in sweeping terms that non-service of a Section 21 notice and non-joinder at Section 11 “does not preclude” later impleadment, because “the relevant consideration” is “if such a person is a party to the arbitration agreement.” This formulation, taken literally, collapses procedure into status and once party status is established under Section 7, the tribunal may add that party post-constitution. As argued in the preceding section, this reasoning when applied in the context of cases where party status is not an issue (signatories), the fundamental principle of party equality is violated. We therefore propose a principled limitation. Adavya should be read as a jurisdictional holding on non-signatory joinder, not as authorising post-constitution impleadment of signatories. This will lead to a gap in the law in cases where the signatories are left out by a claimant in the constitution of the arbitral tribunal stage, in a multi-party dispute, and sought to be impleaded later.
To address this gap, Indian arbitration law should codify a narrow safeguard wherein post-constitution joinder of a signatory shall take effect only upon that party’s express acceptance of the tribunal as constituted. Such a rule is not disruptive and ICC Article 7(5) provides the comparative template. Article 7(5) requires the party sought to be joined post-constitution to accept the constitution of the tribunal and the terms of reference. It has been considered the most balanced solution, navigating party autonomy and the need to ensure effective proceedings with all essential parties, for joinder requests in a time of rising multi-party disputes. This solution affirms the principle of equality as envisaged in Dutco. Such a mechanism is in contrast to the situations that can arise in India post-Advaya as it ensures that a party sought to be joined later is not subject to the jurisdiction of a tribunal it had no part in selecting. It resolves the concerns, highlighted above, surrounding party equality in selection of arbitrators, of signatories that may be left out earlier and sought to be impleaded later. Absent such a safeguard, impleadment post-appointment will continue to compromise procedural fairness, undercut party equality, and raise legitimate concerns about the integrity of arbitral tribunals in multi-party disputes.
Conclusion
The analysis has shown that Adavya, in permitting post-constitution impleadment of signatories without their involvement in tribunal selection, risks eroding the principle of equality in arbitrator appointment. By tracing the different procedural positions of signatories and non-signatories, the paper reveals how a uniform approach to impleadment can have unfair consequences in terms of selection of arbitrators, particularly in multi-party disputes. Situating this within the broader framework of party autonomy, it demonstrates how rights related to party equality central to arbitral fairness may be diminished indirectly, in ways previously addressed in contexts such as Perkins Eastman.
The paper highlights that safeguarding equality in appointment is not merely a matter of form, but a substantive guarantee of impartiality and legitimacy. Addressing the problem highlighted would ensure that procedural efficiency does not come at the expense of the very qualities that make arbitration a trusted dispute-resolution mechanism.
Saarthak Agarwal & Praveen Kumar Yadav are B.A., LL.B. (Hons.) students at the National Law School of India University (NLSIU), Bengaluru