Supreme Court Holds That Non-Issuance of Section 21 Notice Does Not Bar Raising All Contractual Disputes Before the Arbitral Tribunal

Case Name: M/s Bhagheeratha Engineering Ltd. v. State of Kerala
Citation: 2026 INSC 4
Date of Judgment/Order: 05 January 2026
Bench: Justice J.B. Pardiwala and Justice K.V. Viswanathan

Held: The Supreme Court held that non-issuance of a notice under Section 21 of the Arbitration and Conciliation Act, 1996 by one party does not divest the arbitral tribunal of jurisdiction to adjudicate all disputes arising out of or connected with the contract when the arbitration clause is of wide amplitude, the disputes have already traversed contractual pre-arbitral stages, and the conduct of the parties shows that the entire dispute was submitted to arbitration.

Summary: The dispute arose out of multiple road maintenance contracts executed under the Kerala State Transport Project, governed by an escalatory dispute resolution mechanism involving the Engineer, Adjudicator, and thereafter arbitration. After the Adjudicator decided four disputes, the State sought arbitration initially disputing only one issue, while later challenging the entire adjudicator’s decision as null and void. The Arbitral Tribunal entertained all disputes and passed an award in favour of the contractor, which was set aside by the High Court on the ground that the contractor had not issued a separate Section 21 notice for disputes other than the one invoked by the State. The Supreme Court examined the contractual clauses, the statutory scheme of Sections 21, 23 and 16 of the Act, and the conduct of the parties, and found that the High Court had erred in restricting arbitral jurisdiction contrary to the breadth of the arbitration agreement and settled law.

Decision: The appeal was allowed, the judgment of the High Court of Kerala dated 07.01.2025 was set aside, the arbitral award dated 29.06.2006 was restored and upheld in its entirety, and the Supreme Court held that all disputes between the parties were validly adjudicated by the arbitral tribunal, with no order as to costs and all pending applications disposed of.