Supreme Court Clarifies Section 21: Arbitration Begins with Notice, But Failure to Issue Not Fatal
Court says arbitral tribunal retains jurisdiction even if Section 21 notice not served
Judges stress commencement of arbitration linked to notice, not court filing under Section 11
By Our Legal Reporter
New Delhi: January 20, 2026:
In a landmark judgment delivered in January 2026, the Supreme Court of India clarified the scope of Section 21 of the Arbitration and Conciliation Act, 1996, ruling that failure to issue a notice invoking arbitration does not invalidate arbitral proceedings. The Court emphasized that arbitral proceedings commence when the respondent receives a notice requesting arbitration, but the absence of such notice is not fatal if the arbitration clause is widely worded.
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The ruling came in the case of Bhagheeratha Engineering Ltd. v. State of Kerala, where the Kerala High Court had restricted the jurisdiction of the arbitral tribunal due to non-issuance of a Section 21 notice. The Supreme Court set aside the High Court’s order, reaffirming that arbitration is meant to be a flexible, party-driven process and should not be derailed by procedural technicalities.
Background of the Case
- The dispute arose between Bhagheeratha Engineering Ltd. and the State of Kerala over contractual obligations.
- The Kerala High Court held that arbitral proceedings could not cover disputes beyond those specifically referred through a Section 21 notice.
- The Supreme Court bench of Justices J.B. Pardiwala and K.V. Viswanathan disagreed, ruling that the arbitral tribunal retains jurisdiction over all disputes covered by the arbitration clause, even if no Section 21 notice was issued.
- The Court clarified that Section 21 is primarily relevant for fixing limitation periods, not for restricting arbitral jurisdiction.
Key Observations by the Supreme Court
- Commencement of arbitration: Arbitration begins when the respondent receives a notice invoking arbitration, not when a court petition under Section 11 (appointment of arbitrator) is filed.
- Failure to issue notice not fatal: Non-issuance of a Section 21 notice does not invalidate proceedings if the arbitration clause is broad enough.
- Flexibility of arbitration: The Court stressed that arbitration is intended to be a flexible, party-driven process, not bound by rigid procedural formalities.
- Jurisdiction of tribunal: The arbitral tribunal retains jurisdiction to decide disputes covered by the arbitration agreement, even if not specifically mentioned in a Section 21 notice.
- Error by High Court: The Kerala High Court erred in restricting arbitral jurisdiction based on procedural technicalities.
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Comparison Table
|
Aspect |
Section 21 Notice Issued |
Section 21 Notice Not Issued |
|
Commencement of arbitration |
Date respondent receives notice |
Tribunal may still proceed if clause is broad |
|
Jurisdiction of tribunal |
Covers disputes in notice + clause |
Covers disputes in clause, even if not in notice |
|
Impact on limitation |
Fixes limitation period |
Limitation may be contested |
|
Validity of proceedings |
✅ Valid |
✅ Still valid, not fatal |
|
Court’s stance |
Procedural compliance |
Substantive justice prevails |
Why This Ruling Matters
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- For businesses: Provides clarity that arbitration clauses remain enforceable even if procedural notices are missed.
- For lawyers: Reinforces the importance of drafting broad arbitration clauses to avoid jurisdictional challenges.
- For courts: Reduces unnecessary litigation over procedural technicalities.
- For society: Strengthens arbitration as a speedy and flexible alternative to traditional litigation.
Broader Legal Context
This ruling builds on earlier precedents:
- In Regenta Hotels Pvt. Ltd. v. Hotel Grand Centre Point (2026), the Supreme Court held that arbitration commences with notice, not court filing.
- In Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. (2025), the Court ruled that non-issuance of notice does not bar impleading parties to arbitration.
- The latest judgment in Bhagheeratha Engineering Ltd. v. State of Kerala confirms that Section 21 is procedural, not jurisdictional, ensuring arbitration remains flexible and effective.
Risks & Limitations
- Risk of ambiguity: Without a Section 21 notice, disputes over limitation periods may arise.
- Judicial caution: Courts must balance procedural compliance with substantive justice.
- Trade-off: While promoting flexibility, the ruling may reduce predictability in arbitration timelines.
Conclusion
The Supreme Court’s ruling on Section 21 of the Arbitration Act is a landmark in Indian arbitration law. By holding that failure to issue a notice does not invalidate arbitral proceedings, the Court has reinforced the principle of substantive justice over procedural technicalities.
This judgment strengthens arbitration as a flexible, party-driven mechanism, ensuring disputes are resolved efficiently without being derailed by minor procedural lapses. It provides clarity for businesses, lawyers, and courts, reaffirming India’s commitment to promoting arbitration as a reliable alternative to litigation.
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