Failure to issue Section 21 notice not fatal if claims are eventually arbitrable

Introduction

In a significant ruling concerning the procedural nuances of the Arbitration and Conciliation Act, 1996 (the “A&C Act”), the Supreme Court of India has clarified the scope of Section 21 regarding the commencement of arbitral proceedings. The Court held that the failure to issue a formal notice under Section 21 is not fatal to a party’s right to raise claims before an Arbitral Tribunal, provided the claims are otherwise arbitrable and within limitation. The judgment reinforces the principle that procedural lapses cannot be used by a party to take advantage of its own wrong, especially when the arbitration clause is widely worded.

Facts

The dispute arose from a contract awarded to the Appellant, M/s Bhagheeratha Engineering Ltd., by the State of Kerala (Respondent) for road maintenance projects under the Kerala State Transport Project (KSTP). The General Conditions of Contract (GCC) prescribed a multi-tiered dispute resolution mechanism:

1. Reference to an Adjudicator within 14 days of the Engineer’s decision.
2. The Adjudicator to decide within 28 days.
3. Either party could refer the Adjudicator’s decision to arbitration within 28 days; otherwise, the decision became final and binding .

The Appellant raised four specific disputes. The Adjudicator ruled in favor of the Appellant on Dispute Nos. 1 and 3, and against them on Dispute Nos. 2 and 4. The Respondent, dissatisfied with the decision on Dispute No. 1, referred the matter to arbitration. However, this reference was made on October 1, 2004, i.e., well beyond the contractual 28-day period. The Respondent also sought to declare the Adjudicator’s entire decision “null and void”.

The Appellant contended that while the Adjudicator’s decision had become final due to the delay, if the matter were to be arbitrated, all four disputes should be reopened. The Arbitral Tribunal accepted this view, held it had jurisdiction over all issues, and awarded approximately Rs. 1.99 Crores to the Appellant.

However, the District Court set aside the award, and the High Court of Kerala upheld this decision. The High Court reasoned that the Tribunal was appointed solely for Dispute No. 1 at the State’s request, and the Appellant had failed to issue a separate notice under Section 21 of the A&C Act for the remaining disputes.

Issues Before the Supreme Court

1. Whether the High Court was justified in holding that the Arbitral Tribunal’s jurisdiction was limited only to Dispute No. 1.
2. Whether the non-issuance of a notice under Section 21 of the A&C Act by the Appellant regarding Dispute Nos. 2 to 4 was fatal to its right to pursue those claims before the Arbitrator.

Arguments and Analysis

1. Conduct of the Respondent and Waiver

The Supreme Court observed that the Respondent’s conduct precluded it from relying on the strict timelines of the GCC. The Respondent referred the matter to arbitration after the expiry of the 28-day period stipulated in Clause 25.2. Furthermore, by seeking a declaration that the Adjudicator’s decision was “null and void,” the Respondent effectively demonstrated an intention to reopen all four disputes originally adjudicated. Relying on M.K. Shah Engineers & Contractors v. State of M.P., the Court held that a party cannot take advantage of its own wrong. The Respondent, having disregarded the procedural timelines, could not subsequently argue that the Appellant was foreclosed from raising the entire dispute.

2. The Object of Section 21

The Court dismantled the High Court’s reasoning regarding the mandatory nature of Section 21 for every specific claim. It elucidated that the primary object of Section 21 is to determine the date of “commencement” of arbitral proceedings for the purpose of reckoning limitation. It is not a jurisdictional prerequisite for the existence of the Tribunal itself.

Citing the recent decision in ASF Buildtech Private Limited v. Shapoorji Pallonji & Company Private Limited (2025), the Court noted that the term “particular dispute” in Section 21 does not restrict the Tribunal’s jurisdiction to only those disputes mentioned in the notice. Once the Tribunal is constituted, Section 23 allows parties to file statements of claim and defense (including counter-claims). To read a restriction into the Tribunal’s jurisdiction based solely on the initial notice would run contrary to the scheme of the Act.

3. Scope of the Arbitration Clause

The arbitration clause in the contract was widely worded, covering “any dispute or difference arising between the parties.” The Court relied on State of Goa v. Praveen Enterprises to hold that unless the arbitration agreement specifically requires the Arbitrator to decide only specifically referred disputes, a claimant (or counter-claimant) can amend or add claims during the proceedings. In this case, the Appellant was entitled to raise all four disputes once the arbitration was invoked, regardless of who initiated the reference.

Judgment

The Supreme Court allowed the appeal, setting aside the judgment of the High Court of Kerala. The Court restored the Arbitral Award dated June 29, 2006, in its entirety. The Bench emphasized that the High Court had erred in treating the Section 21 notice as a rigid jurisdictional bar and failed to appreciate that the Respondent’s own conduct had thrown the entire dispute open for adjudication.

AMLEGALS Remarks

• Section 21 is Procedural, Not Jurisdictional: A Section 21 notice serves to stop the limitation clock. The absence of a specific notice for a claim does not bar a party from raising it before a duly constituted Tribunal, provided the claim is within the scope of the arbitration agreement and not time-barred.
• Estoppel by Conduct: Parties cannot selectively enforce procedural time bars in multi-tiered dispute resolution clauses if they have previously disregarded those same timelines.
• Broad Arbitration Clauses: When an arbitration clause covers “any dispute,” the Tribunal’s jurisdiction is not confined strictly to the issues raised in the initial reference notice; parties may expand the scope through pleadings under Section 23.

Case Title: M/s Bhagheeratha Engineering Ltd. v. State of Kerala

Citation: 2026 INSC 4

Date of Judgment: January 5, 2026

Court: Supreme Court of India