The rules of the Bar Council of India prohibit law firms from advertising and soliciting work through communication in the public domain. This website is meant solely for the purpose of information and not for the purpose of advertising. Kings & Alliance LLP does not intend to solicit clients through this website. We do not take responsibility for decisions taken by the reader based solely on the information provided in the website. By clicking on ‘ENTER’, the visitor acknowledges that the information provided in the website (a) does not amount to advertising or solicitation and (b) is meant only for his/her understanding about our activities and who we are.
By continuing to use this site you consent to the use of cookies on your device as described in our Cookie Policy
Introduction
Indian arbitration law is increasingly focusing on limiting procedural objections that obstruct effective arbitral resolution. This concern came before the Supreme Court in Bhagheeratha Engineering Ltd. v. State of Kerala1, where the Court examined the scope of Section 21 of the Arbitration Act2, and whether procedural lapses in initiating arbitration could be used to curtail arbitral jurisdiction, despite the conduct of parties and the arbitration agreement.
This issue was taken into consideration by a Division Bench of the Supreme Court comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan. The Court held that Section 21 of the Act is procedural, not jurisdictional. It further clarified that where an arbitration clause is broadly worded, and the parties have participated in the arbitral process, procedural provisions cannot be selectively enforced to defeat adjudication on the merits.
The dispute arose out of four Road Maintenance Contracts executed between the parties, and accordingly, the claims were first presented to the Engineer and thereafter escalated to the Adjudicator, who rendered a composite decision on all disputes. When the matter proceeded to arbitration, the respondent sought to restrict the arbitral reference by invoking Section 21, asserting that arbitration had been formally invoked in respect of only one dispute, even while assailing the adjudicator’s decision in its entirety. This objection ultimately led the courts below to set aside the arbitral award, bringing the controversy before the Supreme Court for final determination.
Procedure Versus Jurisdiction: The Section 21 Challenge
The Appellant contended that Section 21 is procedural in nature and does not control the scope of arbitral jurisdiction once arbitration is validly constituted. It was contended that the arbitration clause was widely worded, covering all disputes arising out of or in connection with the contract, and that the respondent had invited adjudication on all disputes by challenging the adjudicator’s decision in its entirety before the arbitral tribunal. It was further argued that the respondent, having disregarded contractual timelines and participated fully in the arbitral process, could not selectively rely on procedural technicalities to defeat the award.
The Respondent countered that the arbitral tribunal had exceeded its jurisdiction by adjudicating disputes that were never validly referred to arbitration under Section 21 of the Act. It was argued that Section 21 mandates a specific notice invoking arbitration for each dispute, and in the absence of such an invocation, the arbitral tribunal lacked authority to decide claims beyond the single dispute expressly referred. The respondent further relied on the contractual escalatory mechanism, asserting that failure to strictly comply with the prescribed procedure rendered the arbitral award vulnerable to challenge under Section 34 of the Act.
The analysis of the parties’ conduct and the nature of Section 21 by the Hon’ble Supreme Court was that the State had neither objected to delays at the adjudicatory stage nor adhered to the contractual timelines itself, and yet sought to enforce those very procedures as jurisdictional barriers at the arbitral stage. Relying on M.K. Shah Engineers & Contractors v. State of M.P3., the court reiterated that a party cannot take advantage of its own wrong and that procedural preconditions to arbitration are capable of waiver through conduct.
On the interpretation of Section 21, the Court referred to ASF Buildtech Pvt. Ltd. v. Shapoorji Pallonji & Co. Pvt. Ltd4, to reaffirm that the provision merely determines the commencement of arbitral proceedings for limitation purposes and does not restrict arbitral jurisdiction. The position of State of Goa v. Praveen Enterprises5, was reinforced, and it was held that claims not mentioned in a Section 21 notice are not barred from consideration by the arbitral tribunal, nor do they fall outside the tribunal’s jurisdiction.
Further, following Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd6., it was clarified that even counterclaims can be raised without a prior Section 21 notice. An arbitration proceeding works with the consent and conformity of both parties, and because notice did not contain a claim by the opposite party, they are not barred from bringing in their contentions by way of counterclaims.
The Court further emphasised that the arbitration clause in question was of wide amplitude, permitting adjudication of all disputes arising out of or in connection with the contract. Relying further on Indian Oil Corporation Ltd. v. Amritsar Gas Service7, The Court held that once arbitration is validly invoked, the arbitral tribunal is competent to decide all disputes falling within the scope of the arbitration agreement. The authorities relied upon by the State were distinguished as inapplicable to a case involving waiver by conduct and expansive arbitral clauses.
The Supreme Court finally allowed the appeal, set aside the impugned judgments, and restored the arbitral award, holding that Section 21 is a procedural requirement that cannot be used to curtail arbitral jurisdiction when the parties have consciously participated in arbitration on all disputes.
Conclusion
The decision in Bhagheeratha Engineering Ltd. (supra) reinforces the Supreme Court’s consistent pro-arbitration approach by decisively rejecting attempts to undermine arbitral proceedings through post-facto procedural objections. By clarifying that Section 21 of the Act is procedural rather than jurisdictional, the Court corrected the tendency to treat formal invocation as a threshold barrier to arbitral authority. The ruling affirms that arbitral jurisdiction flows primarily from the arbitration agreement and the parties’ actual conduct, rather than from rigid adherence to procedural form.
Equally significant is the Court’s treatment of contractual escalatory mechanisms. By recognising waiver through conduct, the judgment ensures that such clauses cannot be selectively enforced by a party that has itself disregarded contractual timelines and participated fully in the arbitral process. Once a party has invited adjudication on merits, it cannot later retreat behind procedural technicalities to restrict the scope of arbitration. This approach preserves the integrity and finality of arbitration.
The decision nevertheless leaves open important questions for future arbitral practice. How should tribunals evaluate waiver by conduct where parties partially comply with escalatory mechanisms but dispute their finality? What degree of procedural non-compliance should still attract consequences short of nullifying arbitral jurisdiction? And how will courts calibrate the balance between respecting contractual dispute resolution frameworks and preventing their strategic misuse, particularly in complex government contracts? The resolution of these questions will determine how far arbitral substance continues to prevail over procedural form in Indian arbitration law.
Citations
Expositor(s): Adv. Shreya Mishra, Aditi Singh (Intern), Riya Raksha (Intern)
Get notified about new articles, newsletters and regulatory updates.
