Contract Value Below ₹2 Crore Bars Arbitration; Applicability of an Arbitration Clause depends on the Contract Value: P&H High Court Refuses Section 11 Appointment Despite Subsequent Cost Escalation

Case Name: Nirmal Bhardwaj Contractor v. Executive Engineer & Ors.

Date of Judgment: 10 February 2026

Citation: ARB-611-2025

Bench: Justice Jasgurpreet Singh Puri

Held: The Punjab & Haryana High Court held that the applicability of an arbitration clause depends on the contract value at the time of execution of the contract. Where the contract value is below ₹2 crore and the agreement provides for court adjudication, arbitration cannot be invoked merely because the contract value subsequently increases.

Summary: The petitioner sought appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, relying upon Clause 24 of the contract, which provided for arbitration where the contract value exceeded ₹2 crore.

The petitioner argued that although the initial contract value was ₹1.57 crore, it was subsequently enhanced to over ₹2 crore during execution, thereby attracting the arbitration clause under Clause 24.2.

The State opposed the petition, contending that the relevant contract value for determining applicability of arbitration is the value at the time of award of tender, which was below ₹2 crore. It was further argued that Clause 24.1 expressly provided for civil court remedy in such cases, with no provision for arbitration.

The Court examined Clause 24 and observed that it clearly bifurcates dispute resolution based on contract value. For contracts below ₹2 crore, disputes are to be adjudicated by courts, whereas arbitration is permissible only for contracts exceeding ₹2 crore.

The Court rejected the petitioner’s reliance on subsequent enhancement and sanction documents, holding that such estimated or revised costs cannot override the original contractual terms. It emphasized that the contract value at the time of execution is determinative.

Further, the Court reiterated that at the Section 11 stage, it must be satisfied about the existence of a valid arbitration agreement. In the absence of such an agreement for contracts below ₹2 crore, no arbitrator can be appointed.

Decision: The High Court dismissed the petition under Section 11, holding that no arbitration clause was applicable to the contract in question.