Legal provisions involved: Arbitration and Conciliation Act, 1996 – Sections 16, 21, 23 and 34;  Indian Contract Act, 1872 – Section 28(b); Clauses 24.1 and 25 of the General Conditions of Contract.

Judgement by: Supreme Court of India

Judge/Bench: Justice J.B. Pardiwala and Justice K.V. Viswanathan

Facts

Bhagheeratha Engineering Ltd. was given four road maintenance contracts by the State of Kerala. Disputes arose over payments, escalation and interest. All four disputes were first placed before an Adjudicator, who decided two in favour of the contractor and two against it. 

The State challenged only one dispute before the Arbitral Tribunal. The contractor, however, made it clear that it would raise all four disputes. The Tribunal passed an award in favour of the contractor on all claims. The District Court and the High Court later set aside the award, saying that separate notices under Section 21 were not issued for the remaining disputes.

Key legal provisions

• Arbitration and Conciliation Act, 1996 – Sections 16, 21, 23 and 34
• Indian Contract Act, 1872 – Section 28(b)
• Clauses 24.1 and 25 of the General Conditions of Contract.

Issues raised

Whether the Tribunal could decide all four disputes and whether not issuing separate Section 21 notices barred some claims.

Arguments of the case

The State argued that arbitration was limited to one dispute only. The contractor argued that the arbitration clause covered all disputes and that party conduct showed wider consent.

Judgement

The Supreme Court restored the arbitral award and held that a Section 21 notice is only procedural. The Tribunal’s power comes from the arbitration agreement, not from the notice.

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