Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-000039-000039 – 2026 |
| Diary Number | 11333/2025 |
| Judge Name | HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Bench |
HON’BLE MR. JUSTICE J.B. PARDIWALA HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Precedent Value | Binding authority |
| Overrules / Affirms | Sets aside High Court’s limitation of arbitration to a single dispute; reaffirms established jurisprudence on Section 21 and broad arbitration clauses |
| Type of Law | Arbitration and Conciliation Act, 1996; Contract law |
| Questions of Law |
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| Ratio Decidendi |
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| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court | Four World-Bank-funded road maintenance contracts were awarded through competitive bidding. Disputes on price adjustment, escalation, bitumen pricing and interest were referred first to an Adjudicator, who decided four issues. The State rejected the award on one issue and appointed an arbitrator; the contractor then sought to include all four disputes. The Arbitral Tribunal awarded ₹1.99 crore plus interest on all four issues. The District Judge set aside the award and restored the Adjudicator’s decision; the High Court upheld that only dispute No.1 could be arbitrated. The Supreme Court allowed the appeal. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts and High Courts on arbitration jurisdiction and Section 21 interpretation |
| Persuasive For | Arbitral tribunals and contracting parties in infrastructure and construction sector |
| Overrules | Division Bench of the Kerala High Court in Arbitration Appeal No. 56/2012 |
| Distinguishes | Iron & Steel Co. Ltd. v. Tiwari Road Lines (2007); MSK Projects India (JV) Ltd. v. State of Rajasthan (2011) |
| Follows | M.K. Shah Engineers v. State of M.P. (1999); State of Goa v. Praveen Enterprises (2012); ASF Buildtech v. Shapoorji Pallonji (2025); Adavya Projects v. Vishal Structurals (2025); Indian Oil Corp. v. Amritsar Gas Service (1991) |
What’s New / What Lawyers Should Note
- Section 21 notice fixes limitation only; non-issuance does not strip arbitrator of jurisdiction.
- A comprehensive arbitration clause (“any matter arising out of or connected with this agreement”) empowers adjudication of all disputes, regardless of which issues prompted appointment.
- Party conduct (failing to treat adjudicator’s decision as final and then invoking arbitration) precludes objection to jurisdiction (estoppel).
- Disputes and counterclaims not mentioned in the notice can still be raised and amended before the tribunal under Section 23.
Summary of Legal Reasoning
- Conduct and Estoppel
The respondent’s actions (delayed reference, rejecting finality of adjudicator, then invoking arbitration) precluded reliance on contract timelines or limited reference (M.K. Shah). - Section 21 vs. Section 23
Section 21 notice determines commencement date for limitation; it is procedural. Section 23 governs framing of claims, defences and counterclaims; amendments allowed unless contract restricts them. - Broad Arbitration Clause
Clause 25.3 covers “any dispute or difference arising out of or connected with” the contract. Tribunal jurisdiction derives from arbitration agreement, not the scope of the notice under Section 21 (Praveen Enterprises). - Precedents and Statutory Interpretation
Followed ASF Buildtech on non-jurisdictional nature of Section 21. Relied on Adavya Projects on claimant/respondent filing patterns. Indian Oil on counterclaims and post-reference pleadings.
Arguments by the Parties
Petitioner (Contractor)
- The arbitration clause is exhaustive and covers all disputes, not limited to adjudicator’s issues.
- No contractual or statutory requirement to issue a Section 21 notice to invoke arbitration.
- The High Court based its decision on a ground not pleaded before the tribunal.
- The contractor’s letter dated 29.11.2004 constituted adequate invocation and waived any technical objections.
- Allowing only the referring party’s disputes would cause multiplicity of arbitrations and conflicting awards.
Respondent (State)
- The escalation mechanism prescribes strict timelines: decision by engineer, then adjudicator within 14 days, then arbitrator within 28 days.
- Arbitration can only revisit the adjudicator’s decision, not the original disputes under the contract.
- A Section 21 notice is mandatory to constitute the claim and appoint tribunal; non-issuance vitiates jurisdiction.
- Only the referring party is “claimant”; the contractor never invoked arbitration under Section 21.
- Reliance on para 41(c) of State of Goa v. Praveen Enterprises to limit tribunal to specifically referred disputes.
Factual Background
Four road-maintenance contracts under the Kerala State Transport Project were awarded to the contractor. Disputes concerning price adjustment for bitumen/POL, escalation during extensions, bitumen pricing and interest on delayed payments were referred in April 2004 to an Adjudicator, who decided all four disputes. The State rejected the award on dispute No. 1 and, after delay, appointed an arbitrator; the contractor sought arbitration on all four disputes. The Arbitral Tribunal awarded ₹1.99 crore plus 18% interest on all claims. The District Judge set aside the arbitrator’s award and reinstated the Adjudicator’s decision; the High Court confined arbitration to dispute No. 1. The Supreme Court allowed the appeal.
Statutory Analysis
- Section 21, A&C Act: Notice fixes commencement date for limitation; procedural, not a condition of tribunal jurisdiction.
- Section 23, A&C Act: Mandates statement of claim, defence, counterclaim and allows amendments “unless otherwise agreed”.
- Section 16, A&C Act: Governs tribunal’s jurisdictional objections; tribunal held its jurisdiction was comprehensive.
- GCC Clauses 24.1 & 25.2: Engineer/Adjudicator timelines, held to be contractual but waivable by conduct.
- Special Conditions 25.3: Arbitration clause covering all disputes under the agreement.
Alert Indicators
- ✔ Precedent Followed – Reaffirms established doctrine on Section 21 and broad arbitration clauses
- 🔄 Conflicting Decisions – Conflicts with the Kerala High Court’s limitation to a single dispute under the contract