Supreme Court Upholds Comprehensive Arbitration Award in Bhagheeratha Engineering Ltd. v. State of Kerala Supreme Court affirms the wide jurisdiction of arbitral tribunals, emphasizing the non-mandatory nature of Section 21 notice under the Arbitration and Conciliation Act, 1996.
In a landmark judgment, the Supreme Court of India has allowed the appeal filed by M/s Bhagheeratha Engineering Ltd., affirming the arbitral award which had been set aside by the High Court of Kerala. The Supreme Court bench comprising Justices J.B. Pardiwala and K.V. Viswanathan delivered the verdict on January 5, 2026, emphasizing the wide scope of arbitration agreements and the non-mandatory nature of Section 21 notices under the Arbitration and Conciliation Act, 1996.
The case arose from a series of contracts awarded to Bhagheeratha Engineering Ltd. by the State of Kerala for road maintenance as part of the Kerala State Transport Project. Disputes had arisen regarding payment calculations, which were initially adjudicated, resulting in mixed outcomes for the appellant. The State of Kerala challenged the adjudicator's decision, leading to the appointment of an arbitral tribunal.
The tribunal's award was later set aside by the Kerala High Court, which limited the arbitration to only one dispute, citing the absence of a Section 21 notice for other claims. However, the Supreme Court held that the arbitration clause was broad enough to cover all disputes arising from the contract, and that the respondent's actions had effectively waived the procedural requirements. The Court noted that the respondent's conduct precluded it from relying on procedural time limits, thereby allowing all claims and counterclaims to be adjudicated by the arbitral tribunal.
The Supreme Court further clarified that Section 21 of the Arbitration and Conciliation Act is primarily concerned with determining the commencement of arbitration for limitation purposes and is not a mandatory prerequisite for initiating arbitration proceedings. The Court's decision reinstates the arbitral award, granting Bhagheeratha Engineering Ltd. a sum of Rs. 1,99,90,777 along with post-award interest.
This judgment reaffirms the principle that arbitration agreements with wide wording empower tribunals to adjudicate all related disputes, notwithstanding procedural lapses, provided the claims are otherwise valid and within the scope of the agreement. It also underscores the judiciary's support for arbitration as an effective mechanism for dispute resolution.
Bottom Line:
Arbitration - Issuance of Section 21 notice under the Arbitration and Conciliation Act, 1996 is not mandatory for raising claims or counterclaims before the Arbitral Tribunal. Clause 25.3 of the agreement allows for broad adjudication of disputes arising out of or connected with the agreement.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 4, 16, 21, 23, 37
M/s Bhagheeratha Engineering Ltd. v. State of Kerala, (SC) : Law Finder Doc Id # 2833319
