The Bombay High Court has ruled that when an arbitral award is set aside under Section 34 of the Arbitration and Conciliation Act, 1996, a party seeking to restart arbitration must first issue a fresh notice under Section 21 of the Act. The Court observed that this notice marks the commencement of new arbitral proceedings and is necessary for determining the limitation period. It rejected the argument that a party is required to directly file a petition under Section 11 within three years of the earlier award being set aside without first invoking arbitration through a fresh notice.

The Court further explained that the benefit of exclusion of time available under Section 43(4) of the Arbitration and Conciliation Act can be claimed only when arbitration has been validly reinitiated by serving a fresh Section 21 notice.

Addressing a separate issue, the High Court held that a court considering an application under Section 11 cannot automatically refer individuals who were never parties to the arbitration agreement. While questions relating to the involvement of non-signatories may, in appropriate cases, be decided by the arbitral tribunal, the referral court must first be satisfied that there is a prima facie intention to create a legal relationship binding such parties. The Court emphasized that considerations of fairness or convenience cannot compel arbitration in the absence of express or implied consent.

Justice Arun R. Pedneker, deciding the commercial arbitration application, relied on the principles laid down in Harkisandas Tulshidas Pabari & Anr. v. Rajendra Anandrao Acharya & Ors. and reiterated that, unless the parties agree otherwise, arbitral proceedings commence on the date the respondent receives the notice issued under Section 21. Since the fresh notice in the present case had been served within three years of the earlier award being set aside, the Court held that the subsequent Section 11 application was also filed within the prescribed limitation period.

The dispute originated from a partnership deed executed on December 9, 1985, between the applicants and Respondent Nos. 1 and 2. An arbitral award arising from that partnership was delivered on April 15, 2016, but was later set aside by the Bombay High Court under Section 34 on October 15, 2019.

During the intervening period, Respondent Nos. 3 and 4 became partners under separate partnership deeds executed in 2009 using the same firm's name and assets. The applicants later initiated a fresh round of arbitration by issuing a Section 21 notice on March 8, 2024, followed by a Section 11 application filed on October 15, 2026, in which the later-inducted partners were also made parties.

Respondent Nos. 1 and 2 argued that the application was barred by limitation, contending that the three-year period began from the date on which the earlier arbitral award was set aside. Respondent Nos. 3 and 4 separately challenged their inclusion in the proceedings, maintaining that they were not signatories to the original 1985 partnership deed and had been treated as third parties during the earlier arbitration.

After excluding the period covered by the Supreme Court's COVID-19 limitation extensions, the High Court found that the Section 21 notice had been issued within the permissible period, making the Section 11 application maintainable.

On the issue of non-signatories, the Court applied the principles laid down in Cox and Kings and Hindustan Petroleum Corporation Limited. It concluded that Respondent Nos. 3 and 4 neither participated in the original partnership agreement nor derived their rights or liabilities through the original contracting parties in a manner that would bind them to the arbitration agreement.

Accordingly, the Court allowed the application against Respondent Nos. 1 and 2 and referred the disputes between the original parties to arbitration. However, it dismissed the proceedings against Respondent Nos. 3 and 4.

The Court appointed Justice Sadhana Jadhav (Retd.), former Judge of the Bombay High Court, as the sole arbitrator to adjudicate the disputes. The arbitration will proceed in accordance with the terms of the original agreement, with all legal and factual issues left open for determination by the arbitral tribunal.

Case: Hemant D. Shah HUF & Anr. v. Chittaranjan D. Shah HUF & Ors., Commercial Arbitration Application No. 184 of 2026.