1. Road maintenance contracts — Dispute over payments — Adjudication and subsequent arbitration — Challenge to award based on scope of reference and Section 21 notice. (Para 2 , 5 )
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2026 Supreme(SC) 6
SUPREME COURT OF INDIA
J. B. PARDIWALA, K.V. VISWANATHAN, JJ.
M/s Bhagheeratha Engineering Ltd. – Appellant
Versus
State of Kerala – Respondent
Civil Appeal No. 39 of 2026 (@ Special Leave Petition (Civil) No. 7338 of 2025)
Decided On : 05-01-2026
Advocates Appeared:
For the Appellant : Mr. Rajiv Shakdher, Sr. Adv. Mr. George Thomas, Adv. Mr. Dhiraj Abraham Philip, AOR Mr. Sunny George, Adv. Mr. Febin Mathew Varghese, Adv. Ms. Lija Merin John, Adv. Ms. Soyarchon Khangrah, Adv.
For the Respondent: Mr. Naveen R Nath, Sr. Adv. Mr. Nishe Rajen Shonker, AOR Mrs. Anu K Joy, Adv. Mr. Alim Anvar, Adv. Mrs. Devika A.l., Adv. Mr. Santhosh K, Adv. Ms. Disha Gupta, Adv. Mr. Aditya Nath, Adv. Mr. Sai Vaishnav, Adv.
For the Appellant : Mr. Rajiv Shakdher, Sr. Adv. Mr. George Thomas, Adv. Mr. Dhiraj Abraham Philip, AOR Mr. Sunny George, Adv. Mr. Febin Mathew Varghese, Adv. Ms. Lija Merin John, Adv. Ms. Soyarchon Khangrah, Adv.
For the Respondent: Mr. Naveen R Nath, Sr. Adv. Mr. Nishe Rajen Shonker, AOR Mrs. Anu K Joy, Adv. Mr. Alim Anvar, Adv. Mrs. Devika A.l., Adv. Mr. Santhosh K, Adv. Ms. Disha Gupta, Adv. Mr. Aditya Nath, Adv. Mr. Sai Vaishnav, Adv.
The Supreme Court clarified that an Arbitral Tribunal's jurisdiction encompasses all disputes arising from a contract unless expressly limited, and failure to issue a notice under Section 21 of the Act is not fatal to claims arising from an arbitration agreement.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 21 - Dispute Resolution Clauses - The High Court set aside the Arbitration award on grounds of jurisdiction, contending that the Arbitrator exceeded his mandate by adjudicating disputes not specifically referred. It was observed that an Arbitral Tribunal's jurisdiction, once constituted, includes all disputes arising from the contract. The Supreme Court found that the High Court erred in its jurisdictional assessments, determining that proper procedures were not followed and that the adjudicator's decision had not been properly challenged. (Paras 13, 14, 22)
(B) Conduct of the Parties - The respondent's conduct indicated a waiver of the procedural prerequisites and it could not deny the appellant's claims based on technicalities when the parties had not followed the stipulated timelines in good faith. (Paras 15, 16, 18)
Facts of the case:
The appellant, awarded multiple contracts under the Kerala State Transport Project, sought arbitration following the respondent's dissatisfaction with an adjudicator’s decision. The High Court invalidated the arbitration award claiming lack of proper notice under Section 21 of the Act and limited scope of reference.
Findings of Court:
The Supreme Court held the respondent's failure to adhere to contractual timelines and the comprehensive nature of the arbitration agreement allowed the resolution of all disputes before the Arbitral Tribunal.
Issues: Whether the Arbitral Tribunal's jurisdiction was limited only to the disputes explicitly referred by the respondent, and if the non-issuance of a Section 21 notice was fatal for the appellant's claims.
Ratio Decidendi: The Supreme Court asserted that a party cannot benefit from its own procedural shortcomings, echoing that non-compliance with notice requirements under Section 21 does not preclude a claimant from raising other arbitrable disputes, provided these fall within the arbitration agreement.
Result: Appeal allowed, the award of the arbitrator upheld.
Judgement Key Points
The appellant, M/s Bhagheeratha Engineering Ltd., was awarded four road maintenance contracts (RMC 01, 03, 08, and 12) under the Kerala State Transport Project, funded in collaboration with the World Bank, through competitive bidding (!) (!) (!) (!) (!) . Disputes arose regarding payments, including price adjustments for bitumen and POL, escalation during extended periods, bitumen pricing for adjustments, and interest on delayed payments (!) (!) (!) (!) (!) . The appellant quantified these claims and submitted them to the Executive Engineer on 02.03.2004 and 24.03.2004, but no decision was made, leading the appellant to refer the four disputes to the Adjudicator under the contract's dispute resolution mechanism on 15.04.2004 (!) (!) . The Adjudicator issued a decision on 14.08.2004, ruling in favor of the appellant on Disputes 1 and 3, and against on Disputes 2 and 4 (!) (!) . The respondent, dissatisfied with the Adjudicator's finding on Dispute No. 1, issued a letter on 01.10.2004 expressing intent to refer it to arbitration and appointing an arbitrator, beyond the 28-day contractual timeline (!) (!) (!) (!) . The appellant objected to the timeliness but eventually nominated a co-arbitrator on 29.11.2004, reserving rights to raise additional issues and counterclaims (!) (!) (!) . The Arbitral Tribunal was constituted on 11.01.2005, and after proceedings, it ruled on all four disputes in the appellant's favor on 29.06.2006, awarding Rs. 1,99,90,777 plus interest (!) (!) (!) (!) . The respondent challenged this under Section 34 of the Arbitration and Conciliation Act, 1996, before the District Judge, who set aside the award and restored the Adjudicator's decision on 22.06.2010 (!) (!) (!) . The High Court upheld this on appeal on 07.01.2025, primarily on grounds of limited jurisdictional scope and lack of proper notice under Section 21 by the appellant for Disputes 2-4 (!) (!) . The appellant appealed to the Supreme Court, which allowed the appeal, upholding the arbitral award (!) .
Legal Category Hierarchy
Table of Contents
2. Whether non-issuance of Section 21 notice and failure to strictly follow escalatory dispute resolution mechanisms preclude claims before the Arbitral Tribunal. (Para 7 , 8 , 9 , 10 , 11 , 12 )
3. Respondent's conduct waived procedural time-bars; Section 21 notice is for limitation purposes and not a jurisdictional prerequisite for raising claims within the arbitration agreement's scope. (Para 14 , 15 , 16 , 17 , 18 )
4. Section 21 notice is procedural for reckoning limitation; it does not restrict the Arbitral Tribunal's jurisdiction to adjudicate all disputes covered by a widely worded arbitration agreement. (Para 16 , 18 )
5. High Court judgment set aside; Arbitral Tribunal's award upheld in entirety. (Para 22 )
6. Is the issuance of a notice under Section 21 of the Arbitration and Conciliation Act, 1996, a mandatory jurisdictional prerequisite for raising claims?
No. Section 21 is procedural, primarily used to determine the commencement of proceedings for reckoning limitation. Failure to issue such a notice is not fatal if the claims are otherwise valid and fall within the scope of the arbitration agreement. (Para 16 )
7. Does the specific mention of only certain disputes in a Section 21 notice limit the Arbitral Tribunal's jurisdiction to only those disputes?
No. The jurisdiction of the Tribunal emanates from the arbitration agreement, not the notice of invocation. A claimant is not bound to restrict their statement of claim to disputes raised in the notice unless the arbitration agreement specifically requires it. (Para 16 , 18 )
8. Can a party rely on contractual time-limits for referring disputes to arbitration if their own conduct has frustrated those prerequisites?
No. A party cannot take advantage of its own wrong. If the conduct of a party precludes the other from relying on a time-bar, or if the party itself ignores the stipulated time-limits, the procedural prerequisites are deemed waived. (Para 15 )
JUDGMENT :
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of the judgment dated 07.01.2025 passed by the Division Bench of the High Court of Kerala at Ernakulam in Arbitration Appeal No. 56/2012. By the said judgment, the Division Bench of the High Court upheld the order of the District Judge, Thiruvananthapuram, dated 22.06.2010 in O.P. (Arb.) No.238 of 2006, al beit, on different grounds. The District Judge had set aside the award of the Arbitrator as being beyond the scope of reference and against the terms and conditions of the contract and restored the decision of the Adjudicator. The Adjudicator had, by his order of 14.08.2004, decided four disputes and held in favour of the appellant insofar as dispute Nos. 1 and 3 were concerned and against the appellant in relation to dispute Nos. 2 and 4.
3. The principal reason assigned by the High Court was that the Arbitral Tribunal was appointed at the request of the respondent-State to adjudicate on dispute no. (1) alone and the appellant never intended to raise any dispute regarding dispute nos. (2) to (4) by issuing a separate notice under Section 21 of the Arbitration and Conciliation Act, 1996 [for short “the A&C Act”]. The reasoning of the High Court is set out hereinbelow:-
25. We must bear in our mind that the arbitral tribunal was appointed at the request of the State to adjudicate on dispute no. (1) alone. The appellant never intended to raise any dispute regarding point Nos. (2) to (4) by issuing a separate notice under Section 21 of the Act. The assumption that where one-party files an application and gets an arbitrator appointed, the other party can raise all such disputes under the contract before the arbitrator is baseless, especially when the law governing the arbitration specifically provides that the arbitrator can decide only such dispute referred before him and not otherwise. To hold otherwise will certainly do violence to the statute. Hence, we find that the arbitral tribunal had clearly exceeded the jurisdiction in deciding the entire disputes. Perhaps the appellant was under a mistaken impression with regard to its right to have the entire disputes opened for arbitration. We must also note that the State was never put on notice regarding the intention of the appellant to go for arbitration. Even assuming that the contention of the appellant that the State had unequivocally agreed to arbitrate on the entire disputes, the tribunal ought to have framed an issue or given its finding on the jurisdiction as envisaged under Section 16. In the absence of any finding in this regard by the tribunal, we are afraid that the award in question clearly crossed the contours of the law and thus rendering itself to be inexecutable and falling within the mischief of Section 34 of the Arbitration and Reconciliation [sic] Act, 1996.”
4. It is the correctness of this decision, which the appellant has questioned before us in this appeal by way of special leave.
5. The facts lie in a very narrow compass:-
5.1 Four packages of Road Maintenance Contract were awarded to the appellant as part of the Kerala State Transport Project (KSTP) for development of roads in Kerala in collaboration with the World Bank. The work was awarded through competitive bidding.
5.2 The four projects awarded to the appellant were the following:-
“1. RMC 01” Thiruvananthapuram – Kottarakkara Road (5.70 to 25 KM)
2. RMC 03: Thodupuzha – Kalur – Ounukal Road (0.00 to 20 KM)
3. RMC 08: Kozikode – Mavoor Road (0.00 to 10.50 KM)
4. RMC 12: Quilandy – Thamarassery Road (0.00 to 29.30 KM)”
5.3 Under the General Conditions of Contract [for short “GCC”], the following mechanism was provided for adjudication of disputes:-
“24. Disputes
24.1 If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the n
