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In the matter of M/s Bharat Udyog Ltd. v. Ambernath Municipal Council Through Commissioner & Anr. [Special Leave Petition (C) No. 1127 of 2017], the Supreme Court upheld the judgment of High Court of Judicature at Bombay allowing the appeal filed by the Respondent no. 1, Ambernath Municipal Council (hereinafter ‘Municipal Council’) and quashing and setting aside the award as well as the judgment of the Civil Court, making the award a rule of the Court and dismissing the objections of the Municipal Council, in exercise of jurisdiction under Section 39 of the Arbitration Act, 1940. The Court has ruled that in the absence of an arbitration agreement or an informed consent of the Municipal Council for resolution of the dispute through arbitration, a mere participation of Municipal Council to a unilaterally invoked arbitration proceedings would not operate as an estoppel to bar it from raising the legality of the arbitral award being non-est in law.

The dispute arose from an octroi collection contract between the petitioner and petitioner sought a reduction in the minimum reserve price, a demand rejected by the Municipal Council. The dispute resolution mechanism in the contract provided for reference to the Collector and appeals to the Divisional Commissioner and State Government. The petitioner first filed a writ petition which was subsequently withdrawn and the petitioner approached the State Government praying to appoint an arbitrator to resolve the dispute. The State Government, though unconnected with the said contract, responded favourably and appointed Commissioner, Konkan Division, as an Arbitrator to arbitrate the said dispute. Arbitrator so appointed was required to submit an arbitration report to the State Government within one month. It was also provided that the arbitration be conducted in accordance with the provisions of the Arbitration Act, 1940.

The arbitrator had called upon the Respondent-Council to submit a reply and the award was delivered in favour of the Appellant, reducing the minimum reserve price for the proposed contractual work. The petitioner thereon proceeded to file a Miscellaneous Application under Section 14 read with Section 17 of the 1940 Act, seeking that the award be made a rule of the Court.

The Respondent-Municipal Council, which was under a State-appointed Administrator at the time, submitted a reply defending the reserve price but did not consent to arbitration. Upon receiving notice of the petitioner’s application to make the award a rule of court, the Municipal Council filed objections challenging jurisdiction in addition to writing a letter to the Minister, Urban Development Department, inter alia, complaining that the Government Resolution appointing the learned Arbitrator was unilaterally issued. It was pointed out that there was no provision under the contract under which the State Government could appoint an Arbitrator to resolve the dispute between the parties. The Municipal Council also approached the Collector, requesting that the appointment of the Arbitrator be cancelled.

he learned Judge allowed the Miscellaneous Application and directed that a decree be drawn up in terms of the arbitral award. The civil court decision was challenged before the High Court, which had set aside the Civil Court’s decision, and held that “the dispute resolution clause in the contract did not constitute a valid “arbitration agreement” under the law, but rather provided for a departmental dispute-resolution mechanism.”

The High Court found that the State Government lacked jurisdiction to “foist” arbitration on a concluded contract and that the petitioner was estopped from challenging the tender price after voluntarily participating in and winning the bid.

Aggrieved by the High Court’s decision, the private contractor moved to the Supreme Court.

Affirming the impugned finding, the Supreme Court found that since there existed no arbitration agreement between the parties, thus the resulting award was non-est in law.

The Court rejected the Appellant’s argument that a participation of the Respondent to the arbitration proceedings signified its consent to be bound by the outcome. Instead, the Court said that mere “participation does not confer Jurisdiction”.

“There is no estoppel against the Municipal Council for the reason that it had initially participated in the arbitral proceedings. This is for the reason that they were forced into arbitration without consent and contract. At the same time, they challenged the award on jurisdictional grounds before the Civil Court as well as the High Court.”, the court said.

“Since the Arbitrator lacked inherent jurisdiction due to the absence of an arbitration agreement, the entire proceedings were a nullity (coram non judice) and the resulting award was non-est.”, the court observed.

Most recently in the matter of Jagdeep Chowgule v. Sheela Chowgule & Ors. [SLP (C) NO(S).10944-10945 OF 2025], Hon’ble Supreme Court clarified that the ‘Court’ in Section 29A is Court as defined in Section 2(1)(e) of the Arbitration and Conciliation Act, 1996. The Court it was held that that the once an arbitrator has been appointed through the judicial process, the Courts become functus officio and applications seeking extension of mandate under Section 29A are to be filed before Court as defined in Section 2(1)(e). The Court further affirmed the decision in State of Jharkhand v. Hindustan Construction Co. [(2018) 2 SCC 602] affirming the decision in Associated Contracts that solely because a superior Court appoints the arbitrator, or issues directions or has retained some control over the arbitrator, it cannot be regarded as a ‘Court’ of first instance for purposes of Section 42.

In the facts of the case, one of the parties, Appellant, after the original period of 1 year in the arbitration proceeding coming to an end, filed application for extension under Section 29A before the Commercial Court, which allowed the application. The decision of extension under section 29A was challenged in a writ petition on account of appointment of the arbitrator by the High Court under Section 11. The Single Bench of High Court referred the matter to the Division Bench set aside the order of the Commercial Court and permitted the parties to approach the High Court for extension of time. The Appellant came before Supreme Court contending that the Commercial Court alone is the appropriate Court under Section 29A read with Section 2(1)(e) of the Act.

The question of law referred to the Division Bench of the Apex Court was can an application to extend time under Section 29A of the Act can be filed before the High Court or the Civil Court, if an arbitral tribunal – appointed by the High Court or by the parties concerned does not complete proceedings within the required or extended time limit?

The Court analysed the conflicting judgments of High Courts and thereafter deep dived into the scheme of the 1996 Act to decipher the meaning of “court” used in section 29A.

The Court observed that a plain reading of the provisions of the Act suggests that the term “court” used in Section 29-A is to be read with Section 2(1)(e)(i) which refers to either the Principal Civil Court or the High Court with ordinary original civil jurisdiction, depending on the pecuniary jurisdiction in a given case. The Court reasoned out the interpretation by firstly stating that if the legislature had intended to restrict the power to substitute arbitrators under Section 29-A(4), as it did under Section 11 in relation to appointment of an arbitrator, it would have specifically provided in Section 29-A or used language similar to that in Section 15(2) of the Act. The omission of any such language in Section 29-A suggests that reference to the definition of “court” under Section 2(1)(e) can be made. It was observed that Section 14(2) of Act further reinforces this view, as it allows a party to apply to the “Court” for termination of the mandate of an arbitrator, a provision that has also raised questions about which “Court” holds jurisdiction. Moreover, Sections 9 and 34, akin to Section 29-A, use the term “court”, and in such cases as well, the definition under Section 2(1)(e) is applied for determining the appropriate forum for filing these applications. It was held that once an arbitrator is appointed under the Act, the Court loses jurisdiction and becomes functus officio. Therefore, the role of the High Court in appointing the arbitrator does not necessarily extend to the power to substitute the arbitrator or extend time under Section 29-A(4). It was clarified that the power to substitute an arbitrator is consequential and must be exercised by the “Court” empowered to extend the time under Section 29-A(4) of the Act, which may, in some cases, be the Principal Civil Court, rather than the High Court.

Therefore, from a bare reading of Section 2(1)(e)(i), what emerges is that in domestic arbitrations, the term “court” includes the Principal Civil Court, which also encompasses High Courts with ordinary original civil jurisdiction. Interpreting Section 29-A(4) to mean that only the Supreme Court or High Court can extend the mandate of an arbitrator appointed by it would, therefore, contradict the legislative intent. Instead, Section 29-A(4) allows for a broader interpretation that aligns with the framework established under the Act. Conclusion The interpretation of the term “court” under Section 29-A(4) of the Act remains contentious with conflicting judicial pronouncements adding to the uncertainty. Despite these inconsistencies, a contextual and harmonious reading of the provisions suggests that the definition of “court” under Section 2(1)(e) could be applied to determine the appropriate forum. Accordingly, in domestic arbitrations, either the Principal Civil Court or the High Court with ordinary original civil jurisdiction, depending on the pecuniary limits in a given case, may be approached to extend the mandate of the arbitrator.

In a recent judgment pronounced by the Hon’ble Supreme Court in M/s Bhagheeratha Engineering Ltd. v. State of Kerala [Civil Appeal No. 39 of 2026], bench of Justices JB Pardiwala and KV Viswanathan has held that Section 21 is concerned only with determining the commencement of the dispute for the purpose of reckoning limitation. There is no mandatory prerequisite for issuance of a Section 21 notice prior to the commencement of Arbitration. Issuance of a Section 21 notice may come to the aid of parties and the arbitrator in determining the limitation for the claim. Failure to issue a Section 21 notice would not be fatal to a party in Arbitration if the claim is otherwise valid and the disputes arbitrable.

The dispute arose with respect to four Road Maintenance Contracts for development of roads in Kerala with World Bank assistance. The dispute resolution clause incorporated a three-tier mechanism where the disputes were first to be referred to the Engineer, then to an Adjudicator and finally to Arbitration. Contractor raised four issues relating to (1) value of work to be considered for determining price adjustment for bitumen and POL, (2) release of escalation during extended periods, (3) price of bitumen for escalation purposes, and (4) interest for delayed payments out of which two were decided in favour of contractor.  The Adjudicator, by his decision ruled dispute Nos.1 and 3 in favour of the appellant and ruled against the appellant on dispute Nos. 2 and 4. The respondent did not settle the bill on the ground that the finding of the Adjudicator qua dispute No.1 was unacceptable to the respondent. The respondent particularly wrote that “we write to inform you that the award of the Adjudication for Dispute No. 1 is not acceptable and we intent to refer the matter for an arbitration”.

Arbitral Tribunal was constituted. Appellant filed its claim. The respondent filed an application to treat the entire decision of the Adjudicator as null and void on the ground that it was contrary to Clause 24.1 of the GCC. The respondent objected to the appellant being allowed to file the claim petition with regard to all the issues which, according to the respondent, was beyond jurisdiction. The Arbitral Tribunal answered all four issues in favour of the appellant reasoning that arbitration agreement is comprehensive enough to cover any dispute arising out of or in connection with the agreement and further that prayer of the respondent to declare the decision of the adjudicator null and void virtually indicated their intention to open the 4 disputes that are brought before the Arbitral Tribunal.

When the arbitral award was challenged under section 34, the Ld. District Judge allowed respondent’s Section 34 petition and set aside the arbitral award to restore the decision of Adjudicator. Aggrieved, the appellant filed an appeal under Section 37 of the A&C Act. The Division Bench, by the order impugned, clearly found that on the ground that the appellant never sought reference of the dispute by issuing any notice under Section 21 of the A&C Act and only the respondent had issued such a notice on one issue, it found the award to be invalid. However, the order restoring the decision of the Adjudicator was not disturbed.

The specific issue for determination before the Hon’ble Supreme Court was : Whether an arbitral tribunal lacks the jurisdiction to decide disputes beyond a specific issue referred to it and that a party cannot raise additional disputes without issuing a separate notice under Section 21 of the Arbitration and Conciliation Act, 1996?

The Court held that “there is no mandatory prerequisite for issuance of a Section 21 notice prior to the commencement of Arbitration. Issuance of a Section 21 notice may come to the aid of parties and the arbitrator in determining the limitation for the claim. Failure to issue a Section 21 notice would not be fatal to a party in Arbitration if the claim is otherwise valid and the disputes are arbitrable”. The Court reasoned that like claims, the counterclaims are equally permissible and capable of amendment.

The Court further observed that “once the Arbitral Tribunal is constituted, claims, defence and counterclaims are filed. The party which normally files the claim first is, for convenience, referred to as the ‘claimant’ and the party which responds is called the ‘respondent’. The said respondent is also along with the defence statement entitled to file its counter claim. Hence, to contend that the appellant cannot be referred to as a claimant because no notice under Section 21 has been issued is completely untenable”. The Court, thus finding error in the impugned judgment delivered by the High Court that the arbitral tribunal lacked jurisdiction to entertain disputes beyond those mentioned in the initial notice, set it aside and held that such a view was contrary to the statutory framework and settled jurisprudence governing arbitral proceedings.