Bhagheeratha Engineering Ltd. Vs State of Kerala (Supreme Court of India)
Non-Issuance of Section 21 Notice Not Fatal: Arbitration Tribunal Can Decide All Disputes Covered by a Widely Worded Arbitration Clause
The Supreme Court held that failure by one party to issue a notice under Section 21 of the Arbitration and Conciliation Act, 1996 does not invalidate arbitral proceedings, nor does it restrict the jurisdiction of the arbitral tribunal, where the arbitration clause is widely worded and the conduct of the parties demonstrates consensus to arbitrate all disputes. Section 21 serves a procedural purpose—to determine the commencement of arbitral proceedings for limitation—and is not a jurisdictional precondition for raising claims before the tribunal.
The Court found that the High Court erred in holding that the arbitral tribunal was constituted only to adjudicate Dispute No. 1 and that the appellant was barred from raising Dispute Nos. 2 to 4 for want of a separate Section 21 notice. On facts, both parties had departed from the strict timelines under the contractual dispute-resolution clauses, the State had itself rejected the adjudicator’s decision in entirety, withheld payments, sought to reopen all disputes, and actively participated in arbitration without protest—thereby waiving procedural objections and precluding reliance on technical bars.
Relying on Praveen Enterprises, ASF Buildtech, and Adavya Projects, the Court reiterated that once an arbitral tribunal is constituted under a clause referring “any dispute arising out of or connected with the contract”, the claimant is not confined to disputes mentioned in the invocation notice, and the respondent may also raise counterclaims, subject only to limitation and arbitrability. A party cannot take advantage of its own wrong or frustrate arbitration by invoking procedural defaults which it has itself ignored or waived.
Accordingly, the Supreme Court set aside the High Court judgment and restored the arbitral award in its entirety, affirming that arbitral jurisdiction flows from the arbitration agreement, not from the Section 21 notice, and reinforcing a substance-over-form approach consistent with the pro-arbitration mandate of the 1996 Act
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
