Commencement of Arbitration by Section 21 Notice Sufficient to Protect Interim Relief Granted Under Section 9: Karnataka High Court

Rule 9(4) of Karnataka Arbitration Rules Cannot Override Statutory Commencement Defined Under Arbitration Act:- High Court of Karnataka delivered a significant judgment in Maverick Motors LLP & Others v. Rohit Murthy (Commercial Appeal No. 84 of 2025), where it held that arbitral proceedings are deemed to commence from the date a notice is issued under Section 21 of the Arbitration and Conciliation Act, 1996. The Court set aside the Commercial Court's order that had vacated an interim injunction solely on the ground that arbitral proceedings had not been “initiated” within three months as per Rule 9(4) of the High Court of Karnataka Arbitration Rules, 2001. The Division Bench comprising Chief Justice N. V. Anjaria and Justice K. V. Aravind held that the notice dated January 18, 2024, under Section 21 was sufficient compliance, and the interim relief stood valid.

The appellants, Maverick Motors LLP and its partners, had approached the Commercial Court under Section 9 of the Arbitration Act seeking an interim injunction against co-partner Rohit Murthy, preventing him from making unauthorised communications with Eicher Motors Limited and its associated vendors. On January 20, 2024, the Commercial Court granted an ex parte ad interim injunction, which was extended from time to time.

However, by its order dated February 3, 2025, the Commercial Court vacated the injunction by invoking Rule 9(4) of the 2001 Rules, holding that since no arbitral tribunal had been constituted within three months from the filing of the Section 9 petition, the interim relief stood vacated by operation of law. The appellants challenged this finding before the High Court.
Court Observations on Interplay Between Section 21 of the Arbitration Act and Rule 9(4) of the Karnataka Rules: The primary legal question before the High Court was whether the issuance of a Section 21 notice—invoking arbitration—amounted to commencement of arbitral proceedings within the meaning of Rule 9(4), which requires arbitration to be “initiated” within three months of a Section 9 petition.

Answering this, the Court held that the notice dated January 18, 2024, which requested the respondent to appoint an arbitrator, fulfilled the requirement under Section 21 and thereby constituted commencement of arbitral proceedings. The Bench cited the authoritative judgment of the Supreme Court in Sundaram Finance Ltd. v. NEPC India Ltd., AIR 1999 SC 565, to reiterate that arbitration commences from the date such notice is received by the respondent.

Justice K. V. Aravind, authoring the judgment, decisively observed: “A composite reading of Section 21 of the Act and Rule 9(4) of the 2001 Rules indicates that any interim order granted under Section 9 shall not stand vacated if arbitration proceedings are commenced as per Section 21. In the present case, the notice dated 18.01.2024 signifies the commencement of proceedings, and hence Rule 9(4) has no application.”

Court Rejects Interpretation that “Initiation” Requires Appointment of Arbitrator: The respondent argued that Rule 9(4) used the term “initiate” which implies that an arbitral tribunal must be constituted, unlike Section 21 which merely provides for commencement by notice. The Court rejected this argument as erroneous and contrary to statutory intent. It held that no such additional requirement is found in law and that the Section 21 notice sufficiently protects interim relief granted under Section 9.

The Court clarified: “It is a settled position that a Section 9 petition may be filed even before issuance of a Section 21 notice. Hence, there is no requirement that an arbitrator must be appointed within three months. The only statutory requirement is commencement under Section 21.”

Distinguishing Prior Precedents and Upholding Appellants’ Conduct: The respondent had relied on the Karnataka High Court’s earlier decision in M/s. Janardhana Enterprises v. Fine Serve Hospitality Services (India) Pvt. Ltd. to support the claim that failure to initiate arbitration leads to expiry of interim relief. The Division Bench distinguished this case on facts, noting that in Janardhana Enterprises, the Court had ultimately found that no arbitrable dispute existed. In contrast, in the present case, arbitration was indisputably invoked and a Section 11 petition for appointment of arbitrator was already pending before the High Court.

The Court also rejected arguments questioning the bona fides of the appellants for pursuing mediation before applying under Section 11. It noted that the time gap between the notice and the Section 11 petition was justified in light of failed mediation efforts and the respondent's resistance to proposed arbitrators.

The Division Bench allowed the appeal and set aside the Commercial Court’s order dated February 3, 2025. The ad interim injunction granted on January 20, 2024, was reinstated and directed to continue until disposal of the Section 11 petition currently pending before the Court.
“In the present case, arbitral proceedings commenced with the issuance of the Section 21 notice on 18.01.2024. Rule 9(4) of the Karnataka Rules is not attracted. The impugned order vacating the injunction is unsustainable in law,” the Court concluded.

This judgment delivers clarity on the legal position that initiation of arbitration under Rule 9(4) must be interpreted in light of Section 21 of the Arbitration Act. By confirming that service of a Section 21 notice constitutes valid commencement of arbitration, the Karnataka High Court has prevented arbitrary termination of interim protections and ensured consistency with the legislative scheme. The judgment is likely to have wide implications in all interim relief applications under Section 9 where Rule 9(4) of the High Court Rules is cited to vacate injunctions.

Date of Decision: April 29, 2025