The Supreme Court on Monday 5 January 2026 restored a nearly two-decade-old arbitral award worth ₹1.99 crore in favour of M/s Bhagheeratha Engineering Ltd, bringing relief to the contractor in a long-running dispute with the State of Kerala over road maintenance contracts.
Setting aside a Kerala High Court judgment, the top court ruled that the arbitral tribunal had full authority to decide all disputes between the parties and that the absence of a separate arbitration notice under Section 21 of the Arbitration and Conciliation Act did not invalidate the proceedings.
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Background of the Case
The dispute arose from four Road Maintenance Contracts awarded to Bhagheeratha Engineering under the Kerala State Transport Project, a World Bank–assisted programme. Differences emerged over payment calculations, escalation during extended contract periods, the price of bitumen used for adjustment, and interest on delayed payments.
As per the contract, disputes were first referred to an Adjudicator. In August 2004, the Adjudicator ruled partly in favour of the contractor and partly against it. The State government later expressed dissatisfaction with the decision and sought arbitration, leading to the constitution of an arbitral tribunal.
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In June 2006, the tribunal passed an award granting the contractor ₹1,99,90,777 along with post-award interest. The State challenged this award, and in 2010, a district court set it aside. The Kerala High Court later upheld that decision, holding that the tribunal had exceeded its jurisdiction and that only one dispute had been validly referred to arbitration.
The central questions before the Supreme Court were whether the arbitral tribunal could decide all disputes between the parties and whether the contractor’s failure to issue a separate notice under Section 21 of the Arbitration Act barred its claims.
Court’s Observations
A Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan disagreed with the High Court’s approach. The judges noted that the arbitration clause in the contract was widely worded and covered “any dispute or difference arising out of or connected with the agreement.”
Rejecting the State’s technical objections, the Bench observed that Section 21 notices are procedural in nature. “The purpose of Section 21 is to determine the commencement of arbitration for limitation,” the court noted, adding that failure to issue such a notice does not strip the tribunal of jurisdiction.
The court also took note of the State’s conduct. It pointed out that the government itself had sought to reopen all disputes by challenging the Adjudicator’s decision as null and void. “A party cannot be permitted to take advantage of its own conduct,” the Bench remarked, stressing that the State could not later argue that the tribunal’s scope was limited.
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Decision
Allowing the appeal, the Supreme Court set aside the Kerala High Court judgment dated 7 January 2025. As a result, the arbitral award passed on 29 June 2006 was restored in full, including the monetary relief and interest granted to the contractor.
The Bench concluded by stating that no order as to costs was required, finally closing the prolonged dispute.
Case Title: M/s Bhagheeratha Engineering Ltd. v. State of Kerala
Case No.: Civil Appeal No. 39 of 2026
Case Type: Arbitration Appeal
Decision Date: 5 January 2026
