Arbitration agreement, mandatory Section 21 notice and impartiality disclosure are essential before an award can stand.

An arbitration agreement requires clear consensus ad idem; clauses unilaterally printed on invoices, without acceptance, do not create binding consent to arbitrate, and the arbitrator lacks jurisdiction. Section 21 notice is mandatory unless waived by agreement; commencing arbitration without a prior request invoking arbitration defeats the statutory scheme and renders the proceedings unsustainable. Under the pre-amendment Section 12 regime, an arbitrator must disclose circumstances giving rise to justifiable doubts as to independence or impartiality; non-disclosure creating apparent bias vitiates the award.

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Issues: (i) Whether an arbitration agreement existed between the parties and the arbitrator had jurisdiction to enter upon the reference; (ii) whether notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 was mandatory before commencement of the arbitral proceedings; (iii) whether the award was vitiated by the arbitrator's failure to disclose circumstances giving rise to justifiable doubts as to impartiality.

Issue (i): Whether an arbitration agreement existed between the parties and the arbitrator had jurisdiction to enter upon the reference.

Analysis: The purchase orders did not contain any arbitration clause and only conferred jurisdiction on the Bangalore courts. The respondent relied on clauses printed on invoices, but the endorsements on the invoices were only acknowledgements of receipt of quantity and did not amount to acceptance of the arbitration clause. An arbitration agreement requires consensus ad idem, and mere acceptance of supplies or payment against invoices does not by itself establish consent to arbitrate. The cited authorities were applied to hold that a clause unilaterally printed on invoices, without clear acceptance, does not create a binding arbitration agreement.

Conclusion: No valid arbitration agreement existed and the arbitrator lacked jurisdiction to adjudicate the disputes.

Issue (ii): Whether notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 was mandatory before commencement of the arbitral proceedings.

Analysis: Section 21 was treated as a mandatory provision unless the parties agreed otherwise. The provision serves to inform the respondent of the claims, narrow disputes, raise jurisdictional or limitation objections, and facilitate a lawful appointment process. Commencing arbitration by directly filing claims before a unilaterally appointed arbitrator, without prior receipt of a request to refer the dispute to arbitration, was held to defeat the statutory scheme and the consensual character of arbitration. The decisions relied upon by the respondent were distinguished as dealing with limitation and counter-claims, not with the validity of commencement itself.

Conclusion: The absence of a notice invoking arbitration rendered the proceedings unsustainable in law.

Issue (iii): Whether the award was vitiated by the arbitrator's failure to disclose circumstances giving rise to justifiable doubts as to impartiality.

Analysis: The arbitrator was simultaneously dealing with other claims involving the respondent and did not disclose this circumstance to the parties during the proceedings. Under the pre-amendment regime of Section 12, disclosure of circumstances creating justifiable doubts as to independence or impartiality was mandatory. Non-disclosure in such circumstances gives rise to apparent bias and offends the requirement that justice must be seen to be done. The omission was therefore treated as affecting the validity of the award.

Conclusion: The award was liable to be set aside on the ground of non-disclosure and resulting bias.

Final Conclusion: The award was set aside in its entirety because it was passed without a valid arbitration agreement, without compliance with the mandatory notice requirement for commencement of arbitration, and in circumstances vitiated by non-disclosure affecting impartiality.

Ratio Decidendi: An arbitral proceeding commenced without a valid arbitration agreement and without receipt by the respondent of a request invoking arbitration under Section 21 is unsustainable, and an arbitrator's failure to disclose circumstances giving rise to justifiable doubts about impartiality independently vitiates the award.

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