The Supreme Court’s judgment in M/s Bhagheeratha Engineering Ltd. v. State of Kerala, 2026 INSC 4 addresses a recurring and increasingly misused procedural objection in Indian arbitration practice: Whether the absence of a notice under Section 21 of the Arbitration & Conciliation Act, 1996 can invalidate otherwise valid arbitral claims. The answer given by the Court is unambiguous. It cannot.
But the importance of this judgment goes far beyond Section 21. It strikes at a deeper malaise, the tendency to weaponise procedural technicalities to defeat substantive arbitral justice, particularly in government contracts involving multi-tier dispute resolution clauses.
The dispute arose from four Road Maintenance Contracts executed under the Kerala State Transport Project (KSTP), governed by a standard Engineer → Adjudicator → Arbitrator escalation mechanism.
Under the contract; disputes were first to be placed before the Engineer then before the Adjudicator (Clauses 24 & 25 of GCC) and finally, either party could refer the adjudicator’s decision to arbitration Four disputes were raised before the Adjudicator. The Adjudicator decided two in favour of the contractor and two against. The State of Kerala rejected the Adjudicator’s decision, withheld payments, constituted an arbitral tribunal, and itself sought to reopen all disputes. Yet, when the arbitral award ultimately went against the State, a procedural objection was raised:
The contractor never issued a notice under Section 21 of the Act for disputes 2 to 4; therefore, the arbitral tribunal lacked jurisdiction.
The Kerala High Court accepted this argument and set aside the award. However, The Hon’ble Supreme Court held that the High Court’s reasoning suffered from a fundamental misunderstanding of arbitration law. Justice K.V. Viswanathan, speaking for the Bench, observed:
“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… and that the non-issuance of notice under Section 21 was fatal.”
The Court clarified that, Appointment of an arbitral tribunal is not issue-specific unless the contract expressly says so. Section 21 is not jurisdiction-conferring; Conduct of parties can, and often does waive procedural preconditions. This judgment decisively rejects the idea that arbitration can be reduced to issue-by-issue litigation through fragmented notices. In recent years, Section 21 objections have become a default defence strategy in Section 34 proceedings: “No proper invocation” “No notice for this particular claim” “Tribunal exceeded reference” The Supreme Court has now made it clear that Arbitration is governed by the arbitration agreement, not by the contours of a notice. This ruling therefore has direct implications for EPC & infrastructure arbitrations, Government contracts with adjudicator mechanisms, Section 16 jurisdictional challenges, Section 34 objections based on procedural hyper-technicalities.
Section 21 of the Arbitration & Conciliation Act, 1996
One of the most persistent misconceptions in Indian arbitration jurisprudence concerns Section 21 of the Arbitration & Conciliation Act, 1996. Over time, what was intended as a procedural provision for reckoning commencement has been incorrectly elevated into a jurisdictional threshold. The Supreme Court’s judgment in Bhagheeratha Engg. finally lays this misconception to rest, with doctrinal clarity and authoritative finality.
Section 21 of the Act reads:
“Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”
Two aspects are immediately striking: The provision opens with “Unless otherwise agreed by the parties” It speaks only of “commencement”, not jurisdiction, competence, or validity Yet, despite this plain language, Section 21 has frequently been invoked to argue that, absence of notice nullifies claims disputes not mentioned in the notice are non-arbitrable arbitral jurisdiction is “confined” to the notice The Supreme Court has now categorically rejected all three propositions.
The Court held, in unambiguous terms, 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. This statement alone resolves a long-standing fault line in arbitration litigation. The Court further clarified the true object of Section 21:
“Section 21 is concerned only with determining the commencement of the dispute for the purpose of reckoning limitation.”
In other words, Section 21 does not create jurisdiction, it does not limit the tribunal’s authority and it does not restrict the scope of claims Its sole statutory function is temporal, not substantive.
A major analytical contribution of the judgment lies in its adoption and endorsement of the reasoning in ASF Buildtech Pvt. Ltd. v. Shapoorji Pallonji & Co. Pvt. Ltd., (2025) 9 SCC 76. The Supreme Court relied extensively from ASF Buildtech and appreciated the following reasoning:
“The term ‘particular dispute’ under Section 21 does not mean all disputes, nor does it confine the jurisdiction of the Arbitral Tribunal to only those disputes mentioned in the notice of invocation.”
This distinction is critical. Section 21 speaks of “particular dispute” only to identify when arbitration commences Section 23, by contrast, governs claims, points at issue, reliefs, counterclaims The Court explained that 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. To read Section 21 as a jurisdiction-limiting provision would be to rewrite the statute, not interpret it.
The Supreme Court reaffirmed the settled position from State of Goa v. Praveen Enterprises, (2012) 12 SCC 581 and Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd., (2025) 9 SCC 686, holding that, Non-inclusion of certain disputes in a Section 21 notice does not preclude a claimant from raising them during arbitration, provided they are covered by the arbitration agreement. The only consequence is limitation, not maintainability. The Court explained the legal effect succinctly: Claims mentioned in the Section 21 notice → limitation reckoned from notice date. Claims raised later → limitation reckoned from date of filing before tribunal.
Nothing more. Nothing less.
An important practical clarification made by the Court concerns counterclaims. Rejecting the argument that only the party issuing a Section 21 notice can be a “claimant”, the Court held that To contend that a party cannot be referred to as a claimant because no notice under Section 21 has been issued is completely untenable. Once an arbitral tribunal is constituted; either party may file claims and either party may file counterclaims, nomenclature follows Section 23 and Section 2(9), not Section 21. This clarification is particularly significant for government arbitrations, where employers often initiate arbitration but resist contractor claims on technical grounds.
At its core, the judgment reinforces a foundational principle, Arbitral jurisdiction flows from the arbitration agreement, not from the notice invoking arbitration. To permit Section 21 to limit arbitral authority would, encourage fragmented arbitrations, multiply proceedings, defeat efficiency and undermine party autonomy. The Supreme Court expressly warned against such an approach, noting that it would lead to “multiple arbitrations and conflicting awards”, a result wholly inconsistent with the object of the Act.
No party can take Advantage of its own wrong
A defining feature of the Supreme Court’s reasoning in Bhagheeratha Engg. lies in its emphasis on conduct over form. The Court was not prepared to allow the respondent State to rely upon contractual timelines or procedural objections when its own conduct had systematically dismantled the very dispute-resolution structure it sought to invoke.
The judgment proceeds on a foundational equitable principle deeply embedded in Indian arbitration jurisprudence, a party cannot be permitted to approbate and reprobate, nor can it take advantage of its own wrong.
The Court carefully traced the respondent’s conduct across each stage of the contractual dispute resolution mechanism. Despite asserting that the contractor’s reference to the Adjudicator was time-barred under Clause 24.1, the State raised no such objection before the Adjudicator and fully participated in the adjudicatory process. The Adjudicator, in turn, decided all four disputes on merits. Even thereafter, the State did not treat the Adjudicator’s decision as final and binding, notwithstanding the contractual stipulation to that effect.
Most critically, when the State sought to invoke arbitration, it did so not merely to challenge one isolated issue, but by expressly contending before the Arbitral Tribunal that the entire decision of the Adjudicator was null and void. This act, in the Supreme Court’s analysis, was decisive. Once the respondent itself sought to reopen all disputes, it could not later argue that the contractor was procedurally barred from pursuing those very disputes before the Tribunal.
The Court therefore treated the case as one where procedural preconditions stood waived by conduct, bringing the matter squarely within the principle articulated in M.K. Shah Engineers & Contractors v. State of M.P., (1999) 2 SCC 594. In that decision, the Supreme Court had held that even where a contract prescribes mandatory pre-arbitral steps, those steps are capable of being waived, and where one party’s conduct disables compliance, the bar cannot be set up to defeat arbitration.
Applying that principle, the Court held that the State of Kerala, having itself disregarded the timelines under Clauses 24 and 25, and having reopened all disputes before the Arbitral Tribunal, was estopped from asserting that the contractor was foreclosed from raising claims due to procedural lapses.
This reasoning is significant because it shifts the focus of arbitral review away from rigid contractual literalism and towards substantive fairness and party conduct, reinforcing the pro-arbitration ethos of the 1996 Act.
The fallacy of Single-issue Arbitration
One of the most consequential errors corrected by the Supreme Court in this case is the notion that appointment of an arbitrator at the instance of one party amounts to a confined, issue-specific reference. The Kerala High Court had proceeded on the assumption that since the State’s letter invoking arbitration referred expressly to one dispute, the Arbitral Tribunal was jurisdictionally barred from adjudicating the remaining disputes. The Supreme Court rejected this approach as fundamentally misconceived.
The Court reiterated the settled position that under the Arbitration & Conciliation Act, 1996, there is no concept of “reference of disputes” by a court or party unless the arbitration agreement itself so restricts the reference. What is referred is the arbitration itself, not a closed list of issues.
Drawing heavily from State of Goa v. Praveen Enterprises (2012), the Court reaffirmed that where an arbitration clause is widely worded, covering “any dispute or difference arising out of or in connection with the agreement”, the jurisdiction of the Arbitral Tribunal is co-extensive with the arbitration agreement, not with the notice of invocation or the appointing party’s letter.
Once an Arbitral Tribunal is constituted, the statutory scheme under Section 23 comes into operation. The claimant files its statement of claim, the respondent files its defence and counterclaims, and the Tribunal adjudicates all arbitrable disputes that fall within the scope of the arbitration agreement and are within limitation. Unless the contract expressly restricts the Tribunal to adjudicating only specified disputes, there is no legal basis for confining its jurisdiction.
The Supreme Court was particularly categorical in rejecting the argument that only the party issuing a Section 21 notice can be regarded as a “claimant”. The Court clarified that the designation of claimant and respondent is a matter of procedural convenience under Section 23 and institutional rules, not a jurisdictional consequence flowing from Section 21.
In practical terms, the Court’s reasoning eliminates the artificial distinction between “initiating party” and “claimant” that has often been exploited to resist counterclaims or additional claims. Arbitration, the Court emphasised, is not an issue-by-issue contest triggered by fragmented notices, but a comprehensive adjudicatory mechanism designed to resolve the entire spectrum of disputes arising from a contractual relationship.
This aspect of the judgment has far-reaching implications for EPC contracts, infrastructure disputes, and government arbitrations, where employers frequently attempt to confine arbitration to narrow issues while resisting broader claims by contractors.
Takeaways
The decision in Bhagheeratha Engg. is not merely a correction of a High Court error; it is a restatement of first principles that will significantly influence arbitral practice going forward. First, it decisively clarifies that Section 21 is not a jurisdictional weapon. Arbitration practitioners can now confidently resist attempts to invalidate claims solely on the ground that a particular dispute was not mentioned in the notice of invocation. The only relevance of Section 21 lies in the computation of limitation, not in determining the Tribunal’s authority.
Second, the judgment reinforces that conduct matters. Parties, especially State entities cannot selectively rely on contractual timelines while simultaneously ignoring them when inconvenient. Where conduct demonstrates an intention to reopen disputes or waive procedural preconditions, courts will not permit technical objections to defeat arbitral adjudication.
Third, the ruling strengthens the principle that arbitral jurisdiction flows from the arbitration agreement, not from correspondence. Lawyers drafting or invoking arbitration clauses must therefore focus on the width and structure of the arbitration agreement itself, rather than over-engineering invocation notices in an attempt to future-proof jurisdictional challenges.
Fourth, from a drafting perspective, the judgment underscores the importance of clarity. If parties genuinely intend to restrict arbitration to specific disputes or stages, such restriction must be explicit, unambiguous, and contractually entrenched. Absent such language, courts will presume a broad and inclusive reference.
Finally, for Section 34 litigation, this decision narrows the scope of permissible procedural challenges. Courts are unlikely to entertain objections based on non-issuance or limited issuance of Section 21 notices where the disputes are otherwise arbitrable and have been fully contested before the Tribunal.
In sum, the Supreme Court has sent a clear signal; arbitration law in India will not be derailed by procedural hair-splitting. Substance, party autonomy, and fairness remain paramount. For practitioners on the commercial side, this judgment is not only doctrinally satisfying but practically empowering.
