Legal Review and Analysis of Bhagheeratha Engineering Ltd vs State of Kerala 2026 INSC 4
Case Synopsis
Case: Bhagheeratha Engineering Ltd. vs. State of Kerala, 2026 INSC 4Synopsis: The Supreme Court ruled that an arbitral tribunal’s jurisdiction is defined by the arbitration agreement and not restricted by the specifics of a Section 21 notice, which is merely procedural for limitation purposes. The conduct of parties can indicate a wider submission to arbitration, and a party cannot take advantage of its own procedural defaults to limit the tribunal’s authority.
1. Heading of the Judgment
Case Name: M/s Bhagheeratha Engineering Ltd. vs. State of Kerala
Citation: 2026 INSC 4
Court: Supreme Court of India
Judges: Justice J.B. Pardiwala and Justice K.V. Viswanathan
Date: 5th January 2026
2. Related Laws and Sections
The judgment primarily interprets and applies provisions from the Arbitration and Conciliation Act, 1996 and the Indian Contract Act, 1872.
Arbitration and Conciliation Act, 1996:
Section 21: Commencement of arbitral proceedings.
Section 16: Competence of arbitral tribunal to rule on its jurisdiction.
Section 23: Statement of claim and defence, including counter-claims.
Section 34: Application for setting aside arbitral award.Indian Contract Act, 1872:
Section 28(b): Void agreements that restrain legal proceedings.Contractual Clauses:
Clause 24.1 & 25 of the General Conditions of Contract (GCC) for dispute resolution mechanism.
3. Basic Judgment Details
Facts of the Case
The appellant, M/s Bhagheeratha Engineering Ltd., was awarded four road maintenance contracts under the Kerala State Transport Project.
Disputes arose regarding payments, escalation, and interest. The appellant referred four disputes to an Adjudicator as per Clause 24.1 of the GCC.
The Adjudicator decided two disputes in favour of the appellant and two against.
The respondent (State of Kerala) challenged only one dispute before the Arbitral Tribunal via letter dated 01.10.2004, claiming the reference was limited to Dispute No. 1.
The appellant, in its response, reserved the right to raise all four disputes before the Arbitral Tribunal.
The Arbitral Tribunal, constituted on 11.01.2005, allowed all four claims in favour of the appellant.
The District Court set aside the award, which was upheld by the Kerala High Court on the ground that the appellant had not issued a separate notice under Section 21 of the A&C Act for disputes 2 to 4.
Issues Before the Supreme Court
Whether the High Court was correct in holding that the Arbitral Tribunal was appointed only to adjudicate Dispute No. 1?
Whether the non-issuance of a notice under Section 21 of the A&C Act by the appellant for disputes 2 to 4 barred it from pursuing those claims before the arbitrator?
Ratio Decidendi (Court’s Reasoning)
Conduct of the Parties: The respondent’s conduct—failing to adhere to contractual time limits, treating the Adjudicator’s decision as non-binding, and seeking to nullify the entire adjudication—precluded it from restricting the arbitration to only one dispute. The Court cited M.K. Shah Engineers & Contractors vs. State of M.P., holding that a party cannot take advantage of its own wrong.
Purpose of Section 21 Notice: The Supreme Court clarified that Section 21 is merely for determining the commencement of arbitration for limitation purposes. It is not a mandatory precondition for raising claims. The Court relied on ASF Buildtech Private Limited vs. Shapoorji Pallonji & Company Private Limited and Adavya Projects Private Limited vs. Vishal Structures Private Limited, stating that claims and counterclaims can be raised before the Arbitral Tribunal even if not mentioned in a Section 21 notice, provided they fall within the arbitration agreement.
Wide Arbitration Clause: Clause 25.3 of the GCC was widely worded, covering “any dispute or difference arising between the parties relating to any matter arising out of or connected with the agreement.” The Court referred to State of Goa vs. Praveen Enterprises, holding that unless the arbitration agreement specifically restricts the tribunal to only referred disputes, all arbitrable claims can be entertained.
Procedure Under Section 23: Once the Arbitral Tribunal is constituted, parties can file statements of claim, defence, and counterclaims. The appellant’s letter dated 29.11.2004 was sufficient to indicate its intention to raise all disputes.
4. Core Principle of the Judgment
Title: Scope of Arbitral Jurisdiction and the Procedinal Nature of Section 21 Notice
Main Issue
The core issue was whether an arbitral tribunal’s jurisdiction is limited only to those disputes specifically mentioned in a notice of invocation under Section 21 of the A&C Act, or whether it extends to all disputes falling within the arbitration agreement, especially when the parties’ conduct indicates a broader submission.
Supreme Court’s Analysis and Holding
The Supreme Court emphatically ruled that the jurisdiction of an arbitral tribunal is governed by the arbitration agreement, not by the contours of a Section 21 notice. The notice under Section 21 serves a limited procedural purpose—to fix the date for commencement of arbitration for calculating limitation. It does not restrict the tribunal’s authority to adjudicate all disputes that are within the scope of the arbitration clause.
The Court further held that party conduct is crucial in determining the scope of submission to arbitration. In this case, the respondent’s actions—challenging the Adjudicator’s decision as null and void and refusing to treat it as final—demonstrated an intention to reopen all four disputes. Therefore, the respondent was estopped from contending that the arbitration was confined to only one dispute.
The judgment reinforces the pro-arbitration ethos of the 1996 Act, minimizing judicial interference in arbitral process and upholding the tribunal’s authority to decide on its own jurisdiction under Section 16.
5. Final Outcome
The Supreme Court set aside the impugned judgment of the Kerala High Court. The arbitral award dated 29.06.2006 was restored in its entirety. The appeal was allowed with no order as to costs.
6. MCQ Questions Based on the Judgment
Question 1: According to the Supreme Court’s judgment in Bhagheeratha Engineering Ltd. vs. State of Kerala (2026 INSC 4), what is the primary purpose of a notice under Section 21 of the Arbitration and Conciliation Act, 1996?
A. To limit the jurisdiction of the arbitral tribunal to only those disputes mentioned in the notice.
B. To serve as a mandatory precondition without which no claim can be raised in arbitration.
C. To determine the date of commencement of arbitral proceedings for the purpose of calculating limitation.
D. To replace the arbitration agreement and define the scope of the tribunal’s authority.
Question 2: In the aforementioned judgment, the Supreme Court held that a party can be precluded from restricting the scope of arbitration based on its own conduct. This principle is best aligned with which of the following legal maxims?
A. Ubi jus ibi remedium
B. Nemo dat quod non habet
C. Nullus commodum capere potest de injuria sua propria (No one can take advantage of their own wrong)
D. Actus non facit reum nisi mens sit rea