Supreme Court of India
M/S BHAGHEERATHA ENGINEERING LTD.versusSTATE OF KERALA
- Citation
- 2026 INSC 4
- Decided
- 5 January 2026
- Disposal
- Appeal(s) allowed
- Bench
- B PARDIWALA
Holding
The High Court erred; the arbitral tribunal had jurisdiction over all four disputes and the non‑issuance of a Section 21 notice is not fatal, so the arbitral award is upheld.
Summary
The appellant, Bhagheeratha Engineering Ltd., was awarded four road‑maintenance contracts under the Kerala State Transport Project and, after disputes over payments, referred the matters to an adjudicator under the contract’s General Conditions. The adjudicator decided in favour of the appellant on two disputes and against it on two others; the respondent (State of Kerala) then invoked the arbitration clause (Clause 25.3) claiming only dispute 1, while the appellant sought to arbitrate all four disputes. The High Court held that the arbitral tribunal was limited to dispute 1 and that the appellant’s failure to serve a Section 21 notice for disputes 2‑4 was fatal, setting aside the award. On appeal, the Supreme Court held that the respondent’s conduct precluded it from limiting the arbitration, that the arbitration clause was wide‑ranging, and that a Section 21 notice is merely procedural and not a jurisdictional prerequisite. Consequently, the Court restored the arbitral award in its entirety. The appeal was allowed.
Issues considered
- Whether the arbitral tribunal was appointed only to adjudicate dispute 1 or could decide all four disputes under the contract’s arbitration clause.
- Whether the appellant’s failure to issue a notice under Section 21 of the Arbitration and Conciliation Act, 1996, for disputes 2‑4 rendered its claim before the arbitrator fatal.
- Whether the arbitral tribunal exceeded its jurisdiction by deciding matters beyond the dispute referred to it.
- Whether the wording of Clause 25.3 of the contract makes the arbitration agreement comprehensive enough to cover all disputes arising out of the agreement.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 16, s. 21, s. 23, s. 28(b), s. 2(9), s. 34, s. 37
- Indian Contract Act, 1872s. 28(b)
Headnote
Issue for Consideration Whether the High Court by the impugned order was justified in holding that the Arbitral Tribunal was appointed at the request of the State to adjudicate dispute No.1 only; was the non-issuance of a notice u/s.21, Arbitration and Conciliation Act, 1996 by the appellant its claim before the Arbitrator. Headnotes† Arbitration and Conciliation Act, 1996 – Four packages of Road Maintenance Contract were awarded to the appellant – Appellant quantified the amounts due and submitted the same for decision by the Executive Engineer – As per the
Subjects
Arbitral Tribunal did not exceed its jurisdiction in deciding the entire disputeEntire dispute could be raised before ArbitratorEntire disputeArbitration Clause widely wordedSection 21, Arbitration and Conciliation ActNotice under Section 21, Arbitration and Conciliation ActNo mandatory prerequisite for issuance of Section 21 notice prior to the commencement of ArbitrationParty at fault cannot take advantage of the sameRoad Maintenance ContractKerala State Transport Project (KSTP)Development of roads in KeralaCollaboration with World BankGeneral Conditions of Contract (GCC)Pending payments
Judgment
[2026] 1 S.C.R. 303 : 2026 INSC 4
M/s Bhagheeratha Engineering Ltd.
v.
State of Kerala
(Civil Appeal No. 39 of 2026)
05 January 2026
[J.B. Pardiwala and K.V. Vishwanathan,* JJ.]
Issue for Consideration
Whether the High Court by the impugned order was justified in
holding that the Arbitral Tribunal was appointed at the request of
the State to adjudicate dispute No.1 only; was the non-issuance
of a notice u/s.21, Arbitration and Conciliation Act, 1996 by the
appellant fatal for it to pursue its claim before the Arbitrator.
Headnotes†
Arbitration and Conciliation Act, 1996 – Four packages of
Road Maintenance Contract were awarded to the appellant –
Appellant quantified the amounts due and submitted the same
for decision by the Executive Engineer – As per the appellant,
since the Executive Engineer/Superintending Engineer failed
to take any decision, the appellant approached the Adjudicator
under Clause 25.1 of the General Conditions of Contract, who
ruled in favour of the appellant on dispute Nos.1 and 3 and
against it on dispute Nos.2 and 4 – Respondent issued letter
referring to arbitration Clause 25.3 expressing intention to
refer only dispute No.1 to arbitration – Eventually, co-arbitrator
nominated – By its award, the Arbitral tribunal answered all
four disputes in favour of the appellant – Award challenged
by the Respondent u/s.34 – Petition allowed by District Judge,
award was set aside and the decision of the Adjudicator
restored – Order upheld by High Court – Interference with:
Held: High Court erred in setting aside the award on the basis
that the appointment of the Tribunal was only to adjudicate dispute
No.1 – On facts, conduct of the respondent precluded it from
relying on the mandate of clause 24, 24.1 and 25 to contend
that the appellant was foreclosed from raising the entire dispute
* Author
304 [2026] 1 S.C.R.
Supreme Court Reports
before the Arbitrator – The party at fault cannot be permitted to
take advantage of the same – High Court also erred in holding that
the non-issuance of notice u/s.21, A&C Act by the appellant with
regard to dispute no.2 to 4 was fatal for it to pursue its claim before
the arbitrator – There is no mandatory prerequisite for issuance
of a s.21 notice prior to the commencement of Arbitration – Also,
High Court erred in holding that the Arbitral Tribunal exceeded its
jurisdiction in deciding the entire dispute – Arbitration Clause 25.3
is widely worded and any dispute or difference arising between the
parties relating to any matter arising out of or concerned with the
agreement are to be settled in accordance with the A&C Act by the
Arbitral Tribunal – Judgment of High Court set aside – Award of
the arbitrator upheld in its entirety – Contract Act, 1872 – s.28(b).
[Paras 14-16, 18, 22]
Arbitration and Conciliation Act, 1996 – s. 21 – Object of – Was
the non-issuance of a notice u/s.21 by the appellant fatal for
it to pursue its claim before the Arbitrator:
Held: No – The object of s.21 is only for the purpose of
commencement of arbitral proceedings – s.21 is concerned only
with determining the commencement of the dispute for the purpose
of reckoning limitation – There is no mandatory prerequisite for
issuance of a s.21 notice prior to the commencement of Arbitration
– Issuance of a s.21 notice may come to the aid of parties and
the arbitrator in determining the limitation for the claim – Failure
to issue a s.21 notice would not be fatal to a party in Arbitration
if the claim is otherwise valid and the disputes arbitrable – High
Court erred in holding that the non-issuance of notice u/s.21 by
the appellant with regard to dispute no.2 to 4 was fatal for it to
pursue its claim before the arbitrator. [Paras 14, 16]
Arbitration and Conciliation Act, 1996 – s.2(9), 23:
Held: Once the Arbitral Tribunal is constituted claims, defence
and, counter claims are filed – Party which normally files the claim
first is, for convenience, referred to as the ‘claimant’ and the party
which responds is called the ‘respondent’ – The said respondent
is also along with the defence statement entitled to file its counter
claim – Hence, to contend that the appellant cannot be referred
to as a claimant because no notice u/s.21 has been issued is
completely untenable. [Para 21]
[2026] 1 S.C.R. 305
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
Case Law Cited
State of Goa v. Praveen Enterprises [2011] 10 SCR 1026 : (2012)
12 SCC 581; M.K. Shah Engineers & Contractors v. State of M.P.
[1999] 1 SCR 419 : (1999) 2 SCC 594; ASF Buildtech Private
Limited v. Shapoorji Pallonji & Company Private Limited (2025)
9 SCC 76; Adavya Projects Private Limited v. Vishal Structurals
Private Limited and Others [2025] 5 SCR 243 : (2025) 9 SCC 686;
Indian Oil Corporation Ltd. v. Amritsar Gas Service and Others
[1991] 1 SCC 533 : (1991) 1 SCC 533 – relied on.
Steel Co. Ltd. v. Tiwari Road Lines [2007] 6 SCR 156 : (2007) 5
SCC 703; MSK Projects India (JV) Limited v. State of Rajasthan and
Another [2011] 9 SCR 402 : (2011) 10 SCC 573 – held inapplicable.
List of Acts
Arbitration and Conciliation Act, 1996; Contract Act, 1872; DIAC
Arbitration Proceedings Rules, 2018.
List of Keywords
Arbitral Tribunal did not exceed its jurisdiction in deciding the entire
dispute; Entire dispute could be raised before Arbitrator; Entire
dispute; Arbitration Clause widely worded; Section 21, Arbitration
and Conciliation Act; Notice under Section 21, Arbitration and
Conciliation Act; No mandatory prerequisite for issuance of Section
21, Arbitration and Conciliation Act notice prior to the commencement
of Arbitration; Party at fault cannot take advantage of the same;
Road Maintenance Contract; Kerala State Transport Project (KSTP);
Development of roads in Kerala; Collaboration with World Bank;
General Conditions of Contract (GCC); Pending payments.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 39 of 2026
From the Judgment and Order dated 07.01.2025 of the High Court
of Kerala at Ernakulam in ARBA No. 56 of 2012
Appearances for Parties
Advs. for the Appellant(s):
Rajiv Shakdher, Sr. Adv., George Thomas, Dhiraj Abraham Philip,
Sunny George, Febin Mathew Varghese, Ms. Lija Merin John,
Ms. Soyarchon Khangrah.
306 [2026] 1 S.C.R.
Supreme Court Reports
Advs. for the Respondent(s):
Naveen R Nath, Sr. Adv., Nishe Rajen Shonker, Mrs. Anu K Joy,
Alim Anvar, Mrs. Devika A.l., Santhosh K, Ms. Disha Gupta, Aditya
Nath, Sai Vaishnav.
Judgment / Order of the Supreme Court
Judgment
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of the judgment
dated 07.01.2025 passed by the Division Bench of the High Court of
Kerala at Ernakulam in Arbitration Appeal No. 56/2012. By the said
judgment, the Division Bench of the High Court upheld the order of
the District Judge, Thiruvananthapuram, dated 22.06.2010 in O.P.
(Arb.) No.238 of 2006, al beit, on different grounds. The District Judge
had set aside the award of the Arbitrator as being beyond the scope
of reference and against the terms and conditions of the contract
and restored the decision of the Adjudicator. The Adjudicator had, by
his order of 14.08.2004, decided four disputes and held in favour of
the appellant insofar as dispute Nos. 1 and 3 were concerned and
against the appellant in relation to dispute Nos. 2 and 4.
3. The principal reason assigned by the High Court was that the Arbitral
Tribunal was appointed at the request of the respondent-State to
adjudicate on dispute no. (1) alone and the appellant never intended
to raise any dispute regarding dispute nos. (2) to (4) by issuing a
separate notice under Section 21 of the Arbitration and Conciliation
Act, 1996 [for short “the A&C Act”]. The reasoning of the High Court
is set out hereinbelow:-
25. We must bear in our mind that the arbitral tribunal
was appointed at the request of the State to adjudicate
on dispute no. (1) alone. The appellant never intended
to raise any dispute regarding point Nos. (2) to (4) by
issuing a separate notice under Section 21 of the Act. The
assumption that where one-party files an application and
gets an arbitrator appointed, the other party can raise all
such disputes under the contract before the arbitrator is
[2026] 1 S.C.R. 307
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
baseless, especially when the law governing the arbitration
specifically provides that the arbitrator can decide only such
dispute referred before him and not otherwise. To hold
otherwise will certainly do violence to the statute. Hence,
we find that the arbitral tribunal had clearly exceeded the
jurisdiction in deciding the entire disputes. Perhaps the
appellant was under a mistaken impression with regard to
its right to have the entire disputes opened for arbitration.
We must also note that the State was never put on notice
regarding the intention of the appellant to go for arbitration.
Even assuming that the contention of the appellant that the
State had unequivocally agreed to arbitrate on the entire
disputes, the tribunal ought to have framed an issue or
given its finding on the jurisdiction as envisaged under
Section 16. In the absence of any finding in this regard by
the tribunal, we are afraid that the award in question clearly
crossed the contours of the law and thus rendering itself to
be inexecutable and falling within the mischief of Section
34 of the Arbitration and Reconciliation [sic] Act, 1996.”
4. It is the correctness of this decision, which the appellant has
questioned before us in this appeal by way of special leave.
5. The facts lie in a very narrow compass:-
5.1 Four packages of Road Maintenance Contract were awarded
to the appellant as part of the Kerala State Transport Project
(KSTP) for development of roads in Kerala in collaboration with
the World Bank. The work was awarded through competitive
bidding.
5.2 The four projects awarded to the appellant were the following:-
“1. RMC 01” Thiruvananthapuram – Kottarakkara
Road (5.70 to 25 KM)
2. RMC 03: Thodupuzha – Kalur – Ounukal Road
(0.00 to 20 KM)
3. RMC 08: Kozikode – Mavoor Road (0.00 to 10.50
KM)
4. RMC 12: Quilandy – Thamarassery Road (0.00
to 29.30 KM)”
308 [2026] 1 S.C.R.
Supreme Court Reports
5.3 Under the General Conditions of Contract [for short “GCC”], the
following mechanism was provided for adjudication of disputes:-
“24. Disputes
24.1 If the Contractor believes that a decision taken
by the Engineer was either outside the authority given
to the Engineer by the Contract or that the decision
was wrongly taken, the decision shall be referred to
the Adjudicator within 14 days of the notification of
the Engineer’s decision.
25. Procedure for Disputes
25.1 The Adjudicator shall give a decision in writing
within 28 days of receipt of a notification of a dispute.
25.2 The Adjudicator shall be paid daily at the
rate specified in the Contract Data together with
reimbursable expenses of the types specified in the
Contract Data and the cost shall be divided equally
between the Employer and the Contractor, whatever
decision is reached by the Adjudicator. Either party
may refer a decision of the Adjudicator to an Arbitrator
within 28 days of the Adjudicator’s written decision.
If neither party refers the dispute to arbitration within
the above 28 days, the Adjudicator’s decision will be
final and binding.
25.3 The arbitration shall be conducted in accordance
with the arbitration procedure stated in the Special
Conditions of Contract.”
Special Conditions of Contract
“4. ARBITRATION (GCC Clause 25.3)
The procedure for arbitration will be as follows:
25.3. (a) In case of Dispute or difference arising
between the Employer and a domestic contractor
relating to any matter arising out of or connected
with this agreement, such disputes or difference
shall be settled in accordance with the Arbitration
and Conciliation Act, 1996. The arbitral tribunal shall
[2026] 1 S.C.R. 309
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
consist of 3 Arbitrators one each to be appointed by
the Employer and the contractor. The third Arbitrator
shall be chosen by the two arbitrators so appointed
by the Parties and shall act as presiding arbitrator.
In case of failure of the two arbitrators appointed by
the parties to reach upon a consensus within a period
of 30 days from the appointment of the arbitrator
appointed subsequently, the Presiding arbitrator
shall be appointed by the Chairman of Executive
Committee, Indian Roads Congress, New Delhi.”
5.4 Clause 24.1 states that if the contractor believes that a decision
taken by the Engineer was either outside the authority given to
the Engineer by the contract or that the decision was wrongly
taken, the decision shall be referred to the Adjudicator within
14 days of the notification of the Engineer’s decision. Hence,
it is clear that what is contemplated is that disputes may be
referred to the Adjudicator, where the issue involves decisions
beyond the authority of the Engineer, or where decision of the
Engineer is erroneous.
5.5 Further, under Clause 25.1, the Adjudicator was to give a
decision within 28 days of the receipt of the notification of
a dispute and under Clause 25.2, either party may refer the
decision of the Adjudicator to an Arbitrator within 28 days of
the Adjudicator’s written decision and if neither party refers
the dispute to the arbitration within 28 days, the Adjudicator’s
decision will be final and binding.
5.6 In the present case, the appellant, by letters of 02.03.2004
and 24.03.2004 quantified the amounts due and submitted
the same for decision by the Executive Engineer. According
to the appellant, since the Executive Engineer/Superintending
Engineer failed to take any decision, the appellant, by a letter
dated 15.04.2004, approached the Adjudicator under Clause
25.1 of the GCC for decision on pending payments classifying
the disputes as dispute Nos.1 to 4 under the following heads:-
“The disputes before the Adjudicator were:
1. Value of work to be considered for calculating
the price adjustment for bitumen and POL.
310 [2026] 1 S.C.R.
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2. Decision for releasing the escalation during the
extended periods.
3. Price of bitumen to be considered for calculation
of price adjustment of the bitumen.
4. Release of interest payable at 12% per annum
for the delay in releasing the eligible payments
beyond 42 hours from the date of submission
of the monthly statement of the value of work
done during the period as per Clause 42.2 and
43.1 of General Conditions of Contract.”
5.7 The Adjudicator, by his decision of 14.08.2004, ruled in favour
of the appellant on dispute Nos.1 and 3 and ruled against the
appellant on dispute Nos. 2 and 4.
5.8 Notwithstanding the decision of the Adjudicator and the
submission of the final bill by the appellant, the respondent did
not settle the bill on the ground that the finding of the Adjudicator
qua dispute No.1 was unacceptable to the respondent.
5.9 On 01.10.2004, the respondent addressed the following letter
to the appellant.
“Sub: R MC-Contractors—RMC-01,03,08,12—
Adjudication-reg.
Ref: Award of Adjudicator dated 14.8.2004
Further to the letter cited under reference above, we
write to inform you that the award of the Adjudication
for Dispute No. 1 is not acceptable and we intent to
refer the matter for an arbitration. We have appointed
Mr. Subash Chandra Bose, as our arbitrator.
Therefore, you may propose your arbitrator as per
clause 25.3 of General Conditions of contract and
intimate for further action.”
5.10 It will be seen that the reference was under Clause 25.3
which is the arbitration clause. The letter was issued by the
respondent and, according to the respondent, it was confined
to dispute No.1, namely, “value of work to be considered for
calculating the price adjustment for bitumen and POL.
[2026] 1 S.C.R. 311
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
5.11 In response to the letter dated 01.10.2004, the appellant sent
a letter on 14.10.2004 to the respondent. The appellant stated
that the adjudicator’s decision was issued on 14.08.2004 and
the time limit for reference to arbitration was till 11.09.2004, (on
the expiry of 28 days) and as such the letter dated 01.10.2004
was beyond the stipulated time. The appellant stated that
the decision of the adjudicator has become final and binding
upon both the parties. The stand of the appellant was that,
in view of the same, the Arbitral Tribunal has no jurisdiction
to enter into the reference. The appellnt also stated that they
have not received any payment and that compound interest
would be charged.
5.12 The respondent addressed a letter dated 30.10.2004 to the
appellant in response to the appellant’s letter dated 14.10.2004.
The respondent stated that by their letter dated 01.10.2004,
they had conveyed their intention to refer dispute No.1 to the
arbitrator. They further added that they disagreed with the
“recommendations of the adjudicator”. It was further averred
that under Clause 25.2 of the GCC the issue of delay in
referring the matter to arbitration can also be referred and
the appellant can take up the issue before the arbitrator. The
crucial contents of the letter reads as follows:-
“…… Moreover as per clause 24.1 of the agreement
within 14 days you have to refer to the adjudicator
any decision not acceptable to you. Whereas
all the disputes referred are after the stipulated
time for referring the decision of Engineer to
Adjudicator. Hence your argument [sic] with
regard to dates will cut at the root of petition
considered by the adjudicator.
Hence you are here by called upon to forward the
name of the Co-arbitrator to constitute the tribunal.
You are contractually bound to forward the name of
the Co-arbitrator and question regarding dates and
whether decision is binding on KSTP can be referred
to the arbitrator.
As stated earlier your claims before the adjudicator
are delayed for several months and refused to
312 [2026] 1 S.C.R.
Supreme Court Reports
nominate the name of co-arbitrator will be viewed
were serious and we hope you can understand
the implications of disobedience of request of
the employer. Moreover the employer is entitled
proceed further to set aside the recommendation of
adjudicator in accordance with agreement. Hence
you are required to forward the name of co-arbitrator
to our office and to Mr. Subash Chandra Bose to
proceed further. It is true that if the decision of
the Adjudicator is not acceptable to either party,
may refer within 28 days to the Arbitrator. But
there is no existing Arbitrator. This body has to
be constituted and then only refer the matter to
the Arbitrator. We have taken action to constitute
the Arbitration Panel.
Since this is a matter of dispute we are not in a
position to release the payment. Which shall be
subject to Arbitrations decision.”
(Emphasis supplied)
5.13 The respondent also stated that any refusal to nominate the
co-arbitrator would be viewed seriously and hoped that the
appellant will understand the implications of disobedience
of request of the employer. It was also stated that since
it is a matter of dispute, they were not in a position to
release payment which shall be subject to the decision in
arbitration.
5.14 In response to the letter dated 30.10.2004 of the respondent,
the appellant wrote to the respondent on 29.11.2004. After
disagreeing with the interpretation of the respondent on Clause
25.2, the appellant agreed to nominate the co-arbitrator. The
letter further stated as follows:-
“We reiterate that the decision of the Adjudicator’s
decision dated 14.08.2004 is final and binding on
both the parties as per clause 25,2 of the GCC. Since
your grievance against the decision of adjudicator and
no notice to go for arbitration was given within the
[2026] 1 S.C.R. 313
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
stipulated period of GGC 25.2, the said decision is
final and binding upon KSTP. Therefore, please take
notice that we reserve the dispute that exists as on
date for an adjudication by the Arbitral Tribunal is
confined to the following.
Whether the parties have agreed under the contract
to accept the decision of the adjudicator as final
and binding on both the parties if notice to refer the
decision to arbitration is not given within 28 days of
the decision of the adjudicator?
If it is so agreed, whether the decision given by the
adjudicator on 14.08.2004 is final and binding on both
the parties as per clause 25.2 of the GCC?
Since the amount payable as per the decision of
the adjudicator is delayed, whether the contractor is
entitled for monthly compound interest quarterly on
the principle sum so adjudicated as demanded by
the contractor vide letter dated 14-10-04? If so, what
is the reasonable rate of interest payable?
Without prejudice to the above, we would like
record herein that if the Arbitral Tribunal ultimately
decides that the adjudicator’s decision is not final
and binding and can be reopened in arbitration,
we would be raising the following issues for
reference to the Arbitral Tribunal by way of counter
claim.
Whether the reason for delay in execution of work
and the resultant extension of time of completion
of the work is attributable to the contractor or to
KSTP?
If so, whether the contractor is entitled to
escalation during the approved extended period
of contract?
Whether the liquidated damages imposed on the
contractor during the extended period of contract
is sustainable?
314 [2026] 1 S.C.R.
Supreme Court Reports
Whether the contractor is eligible for interest
on all delayed payments beyond 42 days after
submission of the bill to the Engineer?
We have already submitted the final bill for all the
above projects and the payment is still pending
for payment. Payment for RMC 8 & 12 are due for
payment since 08-05-04 and 10.01.04 respectively.
We would request you to kindly release the
payment against the work done for which there is
no dispute for the item rates at an early date so
that accumulation of interest charges for the late
payment can be avoided.”
(Emphasis supplied)
5.15 On 11.01.2005, the Arbitral Tribunal was constituted. Initially,
the appellant did file the application to consider the Adjudicator’s
decision as final and binding which the respondent opposed.
However, the appellant did not press the application and agreed
to file its claim before the Arbitrator. The respondent filed an
application to treat the entire decision of the Adjudicator as
null and void on the ground that it was contrary to Clause 24.1
of the GCC. The respondent also objected to the appellant
being allowed to file the claim petition with regard to all the
issues which, according to the respondent, led to enlargement
of the jurisdiction.
5.16 Respondent in the statement filed on 09.03.2005 sought a
declaration that the decision of the adjudicator be declared
null and void and contended that the appellant’s reference to
the adjudicator itself was out of time and that the acceptance
of the dispute by the adjudicator was not as per Clause 24.1.
The relevant para in the statement is as follows:-
“If the contractor had any protest or dispute in
calculating the ‘R’ value and price of Bitumen.
The contractor should have referred the matter
to the Adjudicator within 14 days of notification.
The notification is the date of payment as per
clause 24.1.
[2026] 1 S.C.R. 315
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
The last date for referring the matter to the Adjudicator
shall be as follows:
Contract Date of To be Date of Total
payment reported report by delays
(Decision) to the contractor
Adjudicator
RMC-01 - 6.9.03 - 20.09.03 - 15.4.04 209
days
RMC-03 - 15.3.03 - 29.3.03 - 15.4.04 383
days
RMC-08 - 8.7.03 - 22.7.03 - 15.4.04 267
days
RMC-12 - 5.6.03 - 19.6.03 - 15.4.04 299
days
From the above it was noticed that the matter
on dispute was referred to the Adjudicator was
delayed. Hence the acceptance of dispute by
the Adjudicator was not as per clause 24.1 and
the Recommendation of the Adjudicator to be
set aside.
As explained in the para 7.2. Our main contention
is that the contractor is the defaulter, who refers the
decision of the employer in calculation of ‘R’ value
and the Bitumen price for price escalation as a dispute
after a huge delay as tabulated in para 7.2. The
adjudicator not considered the delay made by the
contractor in referring the dispute to the Adjudication.
Since the contractors action for referring the
disputes to the Adjudicator after expiring the time
frame as per contract clause 24.1. The acceptance
of dispute and award by the Adjudicators is
considered to be null and void.”
(Emphasis supplied)
5.17 By its ruling of 16.12.2005 under Section 16 of the A&C Act,
the Arbitral Tribunal held that the claims of the appellant still
remained unsettled. It further held that the arbitration clause
316 [2026] 1 S.C.R.
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was comprehensive enough to include any matter arising
out of or connected with the Agreement. It further held that
the prayer of the respondent to declare the Adjudicator’s
decision as null and void indicated their intention to reopen
the four disputes originally brought for consideration before
the Adjudicator. The Tribunal, however, disallowed the claims
of the appellant insofar as they were beyond the claims raised
before the Adjudicator. Pursuant to the decision under Section
16, the appellant revised its claims and confined the claims
to four issues permitted by the order of 16.12.2005. In view
of this, we are not called upon to decide whether the Arbitral
Tribunal was justified in confining the appellant to the four
issues raised before the Adjudicator.
5.18 By its award of 29.06.2006, the Arbitral Tribunal answered
all four issues in favour of the appellant. In all, the appellant
was awarded a total sum of Rs.1,99,90,777/- along with post
award interest @ 18% p.a. Inter alia, the award of the arbitrator
recorded that:-
A) several claims were first raised by the Appellant and they
still remained as unsettled claims;
B) Arbitration agreement is comprehensive enough to
cover any dispute arising out of or in connection with
the agreement;
C) The prayer of the respondent to declare the decision
of the adjudicator null and void virtually indicated their
intention to open the 4 disputes that are brought before
the Arbitral Tribunal;
D) Both parties have rejected the decision of the Adjudicator
which has now become infructuous.
5.19 The respondent challenged the Award under Section 34 before
the District Judge, Thiruvananthapuram in O.P.(Arbitration) No.
238 of 2006. The respondent also challenged the decision
under Section 16 dated 16.10.2005 in its Section 34 petition.
By judgment dated 26.06.2010, the District Judge allowed
respondent’s Section 34 petition and set aside the award
and restored the decision of the Adjudicator on the following
two grounds:-
[2026] 1 S.C.R. 317
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
(i) there was no provision in the contract for extending
the time for referring the issue beyond the period of 28
days; and
(ii) hence there cannot be any question of there being
any consensus between the parties for referring all the
disputes.
5.20 In spite of so holding, the District Judge, for reasons best
known to him, restored the recommendations of the Adjudicator.
Aggrieved, the appellant filed an appeal under Section 37 of the
A&C Act. The Division Bench, by the order impugned, clearly
found that imposition of 28 days time-limit in Clause 25.2 was
contrary to Section 28(b) of the Contract Act. However, on the
ground that the appellant never sought reference of the dispute
by issuing any notice under Section 21 of the A&C Act and
only the respondent had issued such a notice on one issue,
it found the award to be invalid. However, the order restoring
the decision of the Adjudicator was not disturbed.
6. We have heard Mr. Rajiv Shakdher, learned Senior Advocate, for
the appellant and Mr. Naveen R. Nath, learned Senior Advocate for
the respondent. We have gone through the records, including the
written submissions filed by the respective parties.
SUBMISSIONS OF THE APPELLANT: -
7. The learned senior counsel for the appellant submits that the
arbitration clause is exhaustive and covers any dispute or difference
arising between the parties relating to any matter arising out of or
connected with the agreement. According to the learned senior
counsel, the agreement was not limited to the reference of disputes
decided by the adjudicator. It is further contended by the learned
senior counsel that the Division Bench has set aside the award on
a ground not taken by the respondent before the Arbitral Tribunal
or in Court. According to the learned senior counsel, such a course
of action was beyond the scope of Section 37 appeal.
8. Learned senior counsel further contends that there is a clear waiver
under Section 4 of the A&C Act. Learned senior counsel for the
appellant contends that notice is not envisaged at the stage of
invocation under Clause 25.3 of the GCC and Clause 4 of the Special
Conditions of Contract. Learned senior counsel contends that Section
318 [2026] 1 S.C.R.
Supreme Court Reports
21 of the A&C Act opens with the phrase “Unless otherwise agreed by
the parties”, and contends that, in the present case, it was otherwise
agreed in the contract that if a party wishes to settle the dispute, it
may first notify claims to the other party and refer it for settlement
with the engineer and, thereafter, refer it to the adjudicator. According
to the learned senior counsel, the dispute has already been referred
through two stages before referring it to arbitration.
9. Learned senior counsel further contends that the purpose of Section
21 was to primarily determine whether the claims are within limitation,
and no award can be set aside for want of a Section 21 notice. In
any event, learned senior counsel contends that the letter dated
29.11.2004 issued by the appellant should be construed as the
Section 21 notice. Assuming everything against the appellant, the
learned senior counsel contends, that there is no requirement of
issuance of notice under Section 21 by both parties. According to the
learned senior counsel, if one party take steps to constitute an Arbitral
Tribunal, the other party can raise all claims and counterclaims. Any
other interpretation would result in multiple arbitration and conflicting
awards. In conclusion, it was submitted that the Arbitral Tribunal is
a final adjudicator regarding the arbitral procedure. So contending,
it was prayed that the impugned order deserves to be set aside and
the award of the arbitrator be upheld in entirety.
SUBMISSIONS OF THE RESPONDENT: -
10. Learned senior counsel for the respondent contends that the dispute
resolution mechanism comprises escalatory measures which would
mean that the dispute needs to be first resolved by the engineer
and, in case the decision was not acceptable, it was to be referred
to the adjudicator within 14 days. According to the learned senior
counsel, the adjudicator’s decision is required to be in writing within
28 days of the receipt of the notification of dispute. Further what is
referred to the arbitrator is the adjudicator’s decision and not the
original dispute before the engineer.
11. Learned senior counsel submits that this is the agreed procedure for
the appointment of the arbitrators as contemplated under Section
11(2); that these escalatory measures have statutory significance
since they are intended to narrow the dispute referable to the Arbitral
Tribunal. In view of that, it is submitted that for a party to invoke
[2026] 1 S.C.R. 319
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
arbitration it must clearly and categorically be signified, by issuance
of notice that it disputes the adjudicator’s decisions either in entirety
or on specified issues.
12. Learned senior counsel submits that the procedure for appointment of
an arbitrator must be strictly complied and even under Section 28(3) of
the A&C Act, the Arbitral Tribunal is required to take into account the
terms of the contract. Learned senior counsel submits that issuance
of notice under Section 21 is a mandatory requirement and both the
parties to an arbitration agreement have the right to be informed of
the arbitral dispute before the constitution of the Arbitral Tribunal.
According to the learned senior counsel, the appellant could never
be the claimant and the expression claimant can only be attributed
to that party who initiates the arbitration proceedings by issuance of
notice under Section 21. Learned senior counsel disputes the fact
that the letter dated 14.10.2004 or 29.11.2004 of the appellant could
be treated as Section 21 notice. Learned senior counsel submits that
the case of the respondent was covered by para 41(c) of the decision
of this Court in State of Goa v. Praveen Enterprises1.
QUESTIONS FOR CONSIDERATION: -
13. In the above background, the questions that arises for consideration
are (a) whether the High Court by the impugned order was justified
in holding that the Arbitral Tribunal was appointed at the request of
the State to adjudicate dispute No. 1 only? (b) Was the non-issuance
of a notice under Section 21 of the A&C Act by the appellant fatal
for it to pursue its claim before the Arbitrator?
ANALYSIS AND REASONING: -
14. In our opinion, the High Court totally erred in setting aside the
award on the basis that the appointment of the Tribunal was only to
adjudicate dispute No.1. The High Court also erred in holding that
the non-issuance of notice under Section 21 of the A&C Act by the
appellant with regard to dispute no. 2 to 4 was fatal for it to pursue
its claim before the arbitrator. The High Court erred in holding that
the Arbitral Tribunal exceeded its jurisdiction in deciding the entire
dispute. We say so for the following reasons.
1 (2012) 12 SCC 581
320 [2026] 1 S.C.R.
Supreme Court Reports
CONDUCT OF THE RESPONDENT: -
15. Firstly, the sequence of events clearly demonstrates that the present
was a case where conduct of the respondent clearly precluded it
from relying on the mandate of clause 24, 24.1 and 25 to contend
that the appellant was foreclosed from raising the entire dispute
before the Arbitrator. This is because: -
a) Clause 24.1 stipulated a time limit of 14 days to refer the
decision of the Engineer to the adjudicator. While the appellant
contends that the Engineer never decided on any issue after
the appellant quantified the amounts and submitted the same
on 02.03.2024 and 24.03.2024, the respondent has a different
story to tell. According to the respondent, the payment dates
of 06.09.2023, 15.03.2003, 08.07.2003 and 05.06.2003 for
the four different contracts respectively, itself were the dates
of the decision of the Engineer and the appellant delayed the
reference to the adjudicator by 209 days, 383 days, 267 days
and 299 days respectively. Even the adjudicator proceeded on
the basis that the date of payments was the date of decision
of the Engineer. Before the adjudicator no objection was taken
by the respondent about the reference to the adjudicator itself
being barred by time and beyond the scope of clause 24.1.
The adjudicator went ahead and decided dispute Nos.1 and 3
in favour of the appellant and dispute Nos.2 and 4 in favour of
the respondent. The Adjudicator gave his decision on 14 August
2004. Under Clause 25.1, the adjudicator was approached on
15.04.2004 and going by clause 25.1 the adjudicator ought to
have given his decision within 28 days from 15.04.2004, that is
on or before 13.05.2004. This is the second instance of parties
including adjudicator not following the drill of clause 25.1, in its
true letter and spirit.
b) Under Clause 25.2, either party can refer the decision of the
adjudicator to the Arbitrator within 28 days of the adjudicator’s
written decision and if neither party refers the dispute to the
adjudicator within 28 days, the adjudicator’s decision will be
final and binding. In this case, it was on 01.10.2004 i.e. after
the expiry of 56 days that the respondent issued the letter which
they claimed was the reference of the decision in dispute No.1
of the adjudicator. The High Court in the impugned order has
[2026] 1 S.C.R. 321
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
in any event found that the 28 days time limit offends Section
28(b) of the Contract Act. Further, when the appellant wrote back
objecting to the breach of time limit of 28 days, the respondent
wrote back saying that the issue of delay in referring can itself
be referred to the Arbitrator and that they disagreed with the
recommendation of the adjudicator. This itself indicates that
notwithstanding clause 25.2 specifying that on the expiry of
28 days the decision of the adjudicator was final and binding,
the respondent never treated the decision of the adjudicator
as final and binding.
c) Further, the appellant had not received any payments under
any of the heads and the respondent asserted that since the
matter is in dispute, they were not in a position to release the
payment which, according to them, is subject to the decision
of the Arbitrator.
d) The appellant also wrote to the respondent stating that they
disagreed with the interpretation of the respondent of clause
24.2 and that they will be raising all issues before the Arbitrator
to which there was no response from the respondent.
e) To make the matters worse for the respondent before the Arbitral
Tribunal they filed an application to treat the entire decision of
the adjudicator as null and void on the ground that clause 24.1
had been violated.
f) The Arbitral Tribunal adjudicating on the Section 16 objection
of the respondent under Section 16 of A&C rightly held that
the claims of the appellant remained unsettled and further that
the arbitration clause was comprehensive enough to include
any matter arising out of or connected with the agreement.
The Tribunal further held that the prayer of the respondent to
declare the adjudicator’s decision as null and void indicated
their intention to reopen the four disputes originally brought
for consideration.
This Court in M.K. Shah Engineers & Contractors vs. State of
M.P.2, a case similar to the present where the employer was trying
2 (1999) 2 SCC 594
322 [2026] 1 S.C.R.
Supreme Court Reports
to take advantage of its own wrong, rejected the contention of the
employer and held as follows: -
“14. In Halsbury’s Laws of England (4th Edn.) Vol. 2, vide
paras 652, 654, at pp. 363, 365, the law is so stated. The
arbitration agreements may contain a clause which requires
a certain act to be completed within a specified period and
which provides that if that act is not done, either the claim
or the ability to commence an arbitration will be barred.
Such clauses are sometimes known as “Atlantic Shipping”
clauses. The consequences of the expiry of a contractual
limitation period before the completion of the specific act
may however be avoided in three circumstances:
(i) if the court exercises its discretion statutorily conferred
on it, to extend the period to avoid undue hardship;
(ii) if the arbitration clause confers a discretion on the
arbitrator to extend the period and he exercises it;
(iii) if the conduct of either party precludes his relying on
the time-bar against the claimant.
17. No one can be permitted to take advantage of one's
own wrong. The respondent-State of M.P. cannot and
could not have been heard to plead denial of the two
appellants' right to seek reference to arbitration for non-
compliance with the earlier part of clause 3.3.29. In the
case of M/s Chabaldas & Sons, the clause was complied
with. Alternatively, even if it was not complied with in the
case of M/s Chabaldas & Sons, but certainly in the case
of M/s M.K. Shaw, the fault for non-compliance lies with
the respondent-State of M.P. through its officials. The plea
of bar, if any, created by the earlier part of clause 3.3.29
cannot be permitted to be set up by a party which itself has
been responsible for frustrating the operation thereof. It will
be a travesty of justice if the appellants for the fault of the
respondents are denied the right to have recourse to the
remedy of arbitration. A closer scrutiny of clause 3.3.29
clearly suggests that the parties intended to enter into
an arbitration agreement for deciding all the questions
and disputes arising between them through arbitration
and thereby excluding the jurisdiction of ordinary civil
[2026] 1 S.C.R. 323
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
courts. Such reference to arbitration is required to be
preceded by a decision of the Superintending Engineer
and a challenge to such decision within 28 days by the
party feeling aggrieved therewith. The steps preceding
the coming into operation of the arbitration clause
though essential are capable of being waived and if
one party has by its own conduct or the conduct of its
officials, disabled such preceding steps being taken, it
will be deemed that the procedural prerequisites were
waived. The party at fault cannot be permitted to set up
the bar of non-performance of prerequisite obligation
so as to exclude the applicability and operation of the
arbitration clause.”
(Emphasis supplied)
We draw considerable support from the ratio of M.K. Shah (supra) on
the aspect of conduct of the respondent and the holding therein, that
the party at fault cannot be permitted to take advantage of the same.
Further, like in M.K. Shah (supra) the Arbitration clause here also is
of wide amplitude. In view of the above, we reject the contention of
the respondent that the procedure for appointment of an arbitrator
has not been complied with in this case and, as such, the award has
to be set aside. We find absolutely no merit in the same.
OBJECT OF SECTION 21 OF A&C ACT: -
16. Secondly, the object of Section 21 of A&C Act, is only for the purpose
of commencement of arbitral proceedings is also well settled.
Section 21 is concerned only with determining the commencement
of the dispute for the purpose of reckoning limitation. There is no
mandatory prerequisite for issuance of a Section 21 notice prior to
the commencement of Arbitration. Issuance of a Section 21 notice
may come to the aid of parties and the arbitrator in determining the
limitation for the claim. Failure to issue a Section 21 notice would
not be fatal to a party in Arbitration if the claim is otherwise valid
and the disputes arbitrable. In ASF Buildtech Private Limited vs.
Shapoorji Pallonji & Company Private Limited3, one of us, J.B.
Pardiwala J., felicitously put the principle thus: -
3 (2025) 9 SCC 76
324 [2026] 1 S.C.R.
Supreme Court Reports
163. The marginal note appended to Section 21 of the
1996 Act makes it abundantly clear that the notice to be
issued thereunder is for the purpose of “commencement
of arbitration proceedings”. The substantive provision
further makes it clear that the date on which a request/
notice of invocation for referring a dispute is received
by the respondent, would the date on which the arbitral
proceedings in respect of a particular dispute commences.
The words “particular dispute” assume significance in the
interpretation of this provision and its underlying object.
It indicates that the provision is concerned only with
determining when arbitration is deemed to have
commenced for the specific dispute mentioned in the
notice. The language in which the said provision is
couched is neither prohibitive or exhaustive insofar
as reference of any other disputes which although not
specified in the notice of invocation yet, nonetheless
falls within the scope of the arbitration agreement.
The term “particular dispute”, does not mean all
disputes, nor does it confine the jurisdiction of the
Arbitral Tribunal which is said to be one emanating
from the “arbitration agreement” to only those disputes
mentioned in the notice of invocation, as it would
tantamount to reading a restriction into the jurisdiction
of the Arbitral Tribunal to the bounds of the notice of
invocation instead of the arbitration agreement. Thus,
there is no inhibition under Section 21 of the 1996 Act
for raising any other dispute or claim which is covered
under the arbitration agreement in the absence of
any such notice. Section 21 is procedural rather than
jurisdictional it does not serve to create or validate the
arbitration agreement itself, nor is it a precondition for
the existence of the Tribunal’s jurisdiction, but merely
operates as a statutory mechanism to ascertain the
date of initiation for reckoning limitation.
165. Section 23 sub-section (1) places an obligation upon
the claimant to state the facts supporting his “claim”, the
points at issue and the relief or remedy sought by way of
[2026] 1 S.C.R. 325
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
its statement of claim, before the Arbitral Tribunal. Notably,
the legislature, in the first part of the said sub-section,
has deliberately and consciously used the term “claim”
as opposed to “particular dispute” employed in Section 21
of the 1996 Act. Although, it could be said that the term
“particular dispute” under Section 21 connotes a larger
umbrella within which the term “claim” under Section 23
would be subsumed, thereby suggesting that there is no
scope to deviate from what was sought to be referred
by the notice of invocation, we do not think so. We say
so because, the requirement for providing the points at
issue and the relief or remedy sought that exists in sub-
section (1) of Section 23 of the 1996 Act is patently absent
in Section 21 of the 1996 Act, which clearly shows that the
scope and object of these two provisions are at variance
to each other. Further, this sub-section does not stipulate
either explicitly or implicitly, that such “claim” must be the
same or in tandem with the “particular dispute” in respect
of which the notice of invocation was issued under Section
21 of the 1996 Act. This distinction in terminology is neither
incidental nor redundant; rather, it reflects a conscious
legislative design to demarcate the procedural objective
of Section 21 from the substantive function sought or the
framing of issues served by Section 23. Unlike Section 23,
Section 21 does not require any articulation of the relief
its sole purpose is to indicate when arbitration is deemed
to have commenced, for the limited purpose of computing
the limitation period.
169. Any restriction on the nature or content of claims,
counterclaims, or set-offs in arbitration must be
sourced solely from the express language of Section
23 and not from Section 21. Section(s) 21 and 23 of
the 1996 Act although overlap in some aspects with
each other in terms of the claims that would ordinarily
be referred to the Tribunal more often than not tend to
coincide, yet they are by no means tethered together
in such a manner that neither of them can survive
without one another. The latter serves only a procedural
function and does not condition or limit the Tribunal’s
326 [2026] 1 S.C.R.
Supreme Court Reports
jurisdiction to adjudicate claims that may not have
been specifically invoked at the threshold stage. To
read such a limitation into the statutory scheme would
run contrary to both the text and the object of the Act.”
(Emphasis supplied)
More recently in Adavya Projects Private Limited v. Vishal
Structurals Private Limited and others4, this Court reiterating
the purpose and significance of a notice under Section 21 had the
following to observe: -
“24. At this point, it is important to note this Court’s
decision in State of Goa v. Praveen Enterprises [State
of Goa v. Praveen Enterprises, (2012) 12 SCC 581]
wherein it was held that the claims and disputes raised
in the notice under Section 21 do not restrict and limit
the claims that can be raised before the Arbitral Tribunal.
The consequence of not raising a claim in the notice
is only that the limitation period for such claim that is
raised before the Arbitral Tribunal for the first time will
be calculated differently vis-à-vis claims raised in the
notice. However, non-inclusion of certain disputes in
the Section 21 notice does not preclude a claimant from
raising them during the arbitration, as long as they are
covered under the arbitration agreement. Further, merely
because a respondent did not issue a notice raising
counterclaims, he is not precluded from raising the
same before the Arbitral Tribunal, as long as such
counterclaims fall within the scope of the arbitration
agreement.”
[Emphasis supplied]
17. At this stage, it is appropriate to refer to the following passage from
the decision of this Court in Indian Oil Corporation Ltd. v. Amritsar
Gas Service and Others5 which reinforces our holding:-
4 (2025) 9 SCC 686
5 (1991) 1 SCC 533
[2026] 1 S.C.R. 327
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
“15. The appellant’s grievance regarding non-consideration
of its counter-claim for the reason given in the award does
appear to have some merit. In view of the fact that reference
to arbitrator was made by this Court in an appeal arising
out of refusal to stay the suit under Section 34 of the
Arbitration Act and the reference was made of all disputes
between the parties in the suit, the occasion to make a
counter-claim in the written statement could arise only
after the order of reference. The pleadings of the parties
were filed before the arbitrator, and the reference covered
all disputes between the parties in the suit. Accordingly,
the counter-claim could not be made at any earlier stage.
Refusal to consider the counter-claim for the only reason
given in the award does, therefore, disclose an error of law
apparent on the face of the award. However, in the present
case, the counter-claim not being pressed at this stage
by learned counsel for the appellant, it is unnecessary to
examine this matter any further.”
ARBITRATION CLAUSE – WIDELY WORDED: -
18. Thirdly, Clause 25.3 is widely worded and any dispute or difference
arising between the parties relating to any matter arising out of or
concerned with the agreement are to be settled in accordance with
the A&C Act by the Arbitral Tribunal. As held in State of Goa vs.
Praveen Enterprises6 if an arbitration agreement provides that all
disputes between the parties relating to the contract shall be referred
to arbitration, the reference contemplated is the act of parties to the
arbitration agreement. In Praveen Enterprises (supra) it has been
further held as follows:-
“19. There can be claims by a claimant even without
a notice seeking reference. Let us take an example
where a notice is issued by a claimant raising disputes
regarding Claims A and B and seeking reference
thereof to arbitration. On appointment of the arbitrator,
the claimant files a claim statement in regard to the said
Claims A and B. Subsequently if the claimant amends
6 (2012) 12 SCC 581
328 [2026] 1 S.C.R.
Supreme Court Reports
the claim statement by adding Claim C [which is
permitted under Section 23(3) of the Act] the additional
Claim C would not be preceded by a notice seeking
arbitration. The date of amendment by which Claim
C was introduced, will become the relevant date for
determining the limitation in regard to the said Claim
C, whereas the date on which the notice seeking
arbitration was served on the other party, will be the
relevant date for deciding the limitation in regard to
Claims A and B. Be that as it may.
26. Section 23 of the Act makes it clear that when the
arbitrator is appointed, the claimant is required to
file the statement and the respondent has to file his
defence statement before the arbitrator. The claimant
is not bound to restrict his statement of claim to the
claims already raised by him by notice, “unless the
parties have otherwise agreed as to the required
elements” of such claim statement. It is also made
clear that “unless otherwise agreed by the parties” the
claimant can also subsequently amend or supplement
the claims in the claim statement. That is, unless the
arbitration agreement requires the arbitrator to decide
only the specifically referred disputes, the claimant
can while filing the statement of claim or thereafter,
amend or add to the claims already made.
27. Similarly, Section 23 read with Section 2(9)
makes it clear that a respondent is entitled to raise
a counterclaim “unless the parties have otherwise
agreed” and also add to or amend the counterclaim,
“unless otherwise agreed”. In short, unless the
arbitration agreement requires the arbitrator to
decide only the specifically referred disputes, the
respondent can file counterclaims and amend or add
to the same, except where the arbitration agreement
restricts the arbitration to only those disputes which
are specifically referred to arbitration, both the claimant
and the respondent are entitled to make any claims
or counterclaims and further entitled to add to or
amend such claims and counterclaims provided they
[2026] 1 S.C.R. 329
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
are arbitrable and within limitation.
41. The position emerging from the above discussion
may be summed up as follows:
(a) Section 11 of the Act requires the Chief Justice
or his designate to either appoint the arbitrator(s)
or take necessary measures in accordance with the
appointment procedure contained in the arbitration
agreement. The Chief Justice or the designate is not
required to draw up the list of disputes and refer them
to arbitration. The appointment of the Arbitral Tribunal
is an implied reference in terms of the arbitration
agreement.
(b) Where the arbitration agreement provides for
referring all disputes between the parties (whether
without any exceptions or subject to exceptions),
the arbitrator will have jurisdiction to entertain any
counterclaim, even though it was not raised at a stage
earlier to the stage of pleadings before the arbitrator.
(c) Where however the arbitration agreement requires
specific disputes to be referred to arbitration and
provides that the arbitrator will have the jurisdiction
to decide only the disputes so referred, the arbitrator’s
jurisdiction is controlled by the specific reference and
he cannot travel beyond the reference, nor entertain
any additional claims or counterclaims which are not
part of the disputes specifically referred to arbitration.”
It will be seen that when the Arbitral Tribunal is constituted, the
claimant is required to file the statement and the respondent to file his
defence statement with counter claim, if any, before the arbitrator. The
claimant is not bound to restrict his statement of claim to the claims
raised by him in the notice issued, if any, before. The claimant can
also amend or supplement the claims in the claim statement unless
the arbitration agreement requires the arbitrator to decide only the
specifically referred disputes. Equally, counter claims can also be
filed and amended. In the present case, we have already held that
the rigors of clause 24, 24.1 and 25 have not been followed by the
parties and by their conduct the entire dispute have been thrown
at large before the Arbitral Tribunal. Hence, the contention of the
330 [2026] 1 S.C.R.
Supreme Court Reports
respondent that the case of the parties is governed by para 41(c)
of Praveen Enterprises (supra) is rejected.
RELEVANT STATUTORY PROVISIONS: -
19. Section 2(9) of the A&C Act reads as under:-
“2(9) Where this Part, other than clause (a) of section 25
or clause (a) of sub-section (2) of section 32, refers to a
claim, it shall also apply to a counter-claim, and where
it refers to a defence, it shall also apply to a defence to
that counter-claim.”
20. Section 23 of the A&C Act as is relevant is also setout hereinbelow:-
“23. Statement of claim and defence.—(1) Within the
period of time agreed upon by the parties or determined
by the arbitral tribunal, the claimant shall state the facts
supporting his claim, the points at issue and the relief or
remedy sought, and the respondent shall state his defence
in respect of these particulars, unless the parties have
otherwise agreed as to the required elements of those
statements.
(2) The parties may submit with their statements all
documents they consider to be relevant or may add a
reference to the documents or other evidence they will
submit.
(2A) The respondent, in support of his case, may also
submit a counter-claim or plead a set-off, which shall be
adjudicated upon by the arbitral tribunal, if such counter-
claim or set-off falls within the scope of the arbitration
agreement.
(3) Unless otherwise agreed by the parties, either party
may amend or supplement his claim or defence during
the course of the arbitral proceedings, unless the arbitral
tribunal considers it inappropriate to allow the amendment
or supplement having regard to the delay in making it.”
It will be noticed that once the Arbitral Tribunal is constituted claims,
defence and, counter claims are filed. Party which normally files the
claim first is, for convenience, referred to as the ‘claimant’ and the
[2026] 1 S.C.R. 331
M/s Bhagheeratha Engineering Ltd. v. State of Kerala
party which responds is called the ‘respondent’. The said respondent
is also along with the defence statement entitled to file its counter
claim. Hence, to contend that the appellant cannot be referred to
as a claimant because no notice under Section 21 has been issued
is completely untenable. To illustrate the point, the rules from the
DIAC rules are set out: -
“DIAC Arbitration Proceedings Rules, 2018
2.1(g) “Claimant”, notwithstanding any nomenclature given
to the parties in any Court in any proceeding between
them, means the party which files the Statement of Claim
first in point of time. The other party(ies) shall be referred
to as “Respondent(s)”. The party filing Counter-Claim(s)
shall be referred as “Counter-Claimant”.
21. The judgment cited by the respondent namely Iron & Steel Co. Ltd. v.
Tiwari Road Lines7, and MSK Projects India (JV) Limited vs. State
of Rajasthan and Another8, have no application to the facts of the
case, as not only is there no breach of procedure in the appointment
of Arbitral Tribunal, the Arbitral Tribunal has also not travelled beyond
the scope of the reference. No other argument touching upon the
merits of the award have been canvassed before us.
22. For the reasons stated above, we set aside the judgment of the
High Court of Kerala at Ernakulam dated 07.01.2025 in Arbitration
Appeal No. 56/2012. The consequence will be that the award of the
arbitrator dated 29.06.2006 is upheld in its entirety. The appeal is
allowed. No order as to costs.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Divya Pandey
7 (2007) 5 SCC 703
8 (2011) 10 SCC 573
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