Category Archives: Arbitration

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.

In the matter of Oil and Natural Gas Corporation Ltd. vs. G & T Beckfield Drilling Services Pvt. Ltd. [2025 INSC 1066],  the Hon’ble Apex Court held that post-award interest, being statutorily provided under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 (“1996 Act“), cannot be contracted out of by the parties and further even if there is a clause excluding interest, simpliciter, on delayed or disputed payments, it does not, by itself, bar the arbitral tribunal from awarding pendente lite interest. The statutory power of arbitral tribunal to grant  pendente lite interest can be curtailed only by an express necessary implied prohibition in the contract.

When the disputes were referred to arbitration, a three-member arbitral tribunal passed an award in favour of the respondent, directing ONGC to pay, inter alia, the principal amount along with interest at 12% per annum from 12^th December 1998 i.e. from the date of filing of the statement of claim till recovery. Aggrieved, ONGC filed an objection under Section 34 of the Act before the Ld. District Judge, Sivasagar, seeking to set aside the award inter alia on the grounds that the arbitral tribunal had not properly addressed its jurisdictional objection under Section 16(2) of the Act. The District Judge set aside the award. The respondent preferred an appeal under Section 37 before the Hon’ble Gauhati High Court, where the arbitral award was restored. ONGC challenged this decision before the Supreme Court. The limited ground of challenge was whether the arbitral tribunal was justified in awarding interest at 12% per annum despite clause 18.1 of the agreement prohibiting interest on delayed or disputed payments.

The Supreme Court confined its analysis to the question of interest and the scope of Section 31(7) of the 1996 Act. It observed by the Court that Section 31(7) empowers the arbitral tribunal to award interest for separately for pre-reference, pendente lite, and post-award period. While the power to grant pre-reference and pendente lite interest is subject to the agreement between the parties, the post-award interest is statutory and cannot be contracted out of.

The Supreme Court noted that in the instant case, the tribunal had awarded interest at 12% per annum not from the date of the cause of action but from the date of affirmation of the statement of claim before the tribunal, and thus the 12% interest amounted to pendente lite interest.

Clause 18.1 stated that “no interest shall be payable by ONGC on any delayed payment/disputed claim.” The Supreme Court interpreted this clause in light of established precedents in Irrigation Deptt. vs. G.C. Roy [(1992) 1 SCC 508], Union of India vs. Ambica Construction[(2016) 6 SCC 36], Reliance Cellulose Products Ltd. vs. ONGC [(2018) 9 SCC 266], Sayeed Ahmed & Co. vs. State of U.P. [(2009) 12 SCC 26], and THDC vs. Jaiprakash Associates Ltd.[(2012) 12 SCC 10] wherein it has been held that only an express or necessarily implied bar can restrict the arbitrator’s power to grant pendente lite interest. Such a restriction must be an absolute prohibition like those in Sayeed Ahmed & Co. or THDC, where interest was explicitly barred in the contract by using the expression “in any respect whatsoever“. Clause 18.1, in the present case on the other hand, merely provided that ONGC would not pay interest on delayed or disputed payments. Therefore, clause 18.1 could not be construed as barring the arbitral tribunal’s authority to award pendente lite interest. The Supreme Court further found the rate of 12% awarded as reasonable, being lower than the statutory post-award rate of 18% prescribed under Section 31(7)(b) at the time.

Accordingly, the SLP was dismissed.

The Hon’ble Supreme Court, in a recent judgment in Tamil Nadu Cements Corporation vs. Micro and Small Enterprises Facilitation Council [(2025) 4 SCC 1], held that writ petition under Article 226 of the Constitution is maintainable against an order of the Micro and Small Enterprises Facilitation Council (hereinafter referred to as “MSEFC“) passed under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act“), where such order is passed contrary to the statutory procedure, or amounts to a nullity and is therefore, without jurisdiction. It was further held that the remedy under section 34 to challenge the award under the MSMED does not bar the exercise of writ jurisdiction in exceptional cases.

The appellant, Tamil Nadu Cements Corporation Limited (“Appellant“), invited tenders for the design, supply, erection, and commissioning of Electrostatic Precipitators for Cement Works. The contract was awarded to M/s Unicon Engineers. However, M/s Unicon Engineers failed to complete the project within time. Appellant issued several warning letters about poor performance and substandard work. M/s Unicon Engineers filed a petition under Section 18 of the MSMED before the MSEFC, claiming Rs. 2.66 crores with interest. MSEFC, on hearing the parties, held that conciliation had failed and while placing reliance on Sections 15 and 16 of the MSMED Act, directed the Appellant to pay Rs. 39.66 lakhs as balance retention money and Rs. 1.57 crores towards additional expenditures with interest.

The Appellant challenged the order before the High Court of Madras under Section 33 and Section 34 of the Arbitration and Conciliation Act, 1996 (“1996 Act“), and also filed a writ petition challenging the vires of Sections 16 to 19 of the MSMED Act. The High Court dismissed the petition od Appellant for two reasons, firstly, for being time-barred and secondly, for not complying the statutory requirement of the mandatory 75% pre-deposit under Section 19 of the MSMED Act. The petition under section 37 of the 1996 Act and writ petitions filed by Appellant were also dismissed on the ground that the Appellant had exhausted all remedies. Appellant approached the Hon’ble Supreme Court challenging the dismissal of writ petitions against MSEFC orders.

The issue was whether a writ petition under Article 226 is maintainable against orders of the MSEFC passed under Section 18 of the MSMED Act, and if so, under what circumstances.

The Hon’ble Supreme Court placed its reliance on Jharkhand Urja Vikas Nigam Ltd. vs. State of Rajasthan [(2021) 19 SCC 206]. In Jharkhand Urja Vikas Nigam Ltd. , it was held that conciliation and arbitration under Section 18(2) and (3) are distinct stages. In the event conciliation fails, the MSEFC must formally initiate arbitration under the 1996 Act. If an order passed without following due process, a writ petition is maintainable even bypassing Section 34 proceedings.

The Court also referred the judgments in Gujarat State Civil Supplies Corporation Ltd. vs. Mahakali Foods Pvt. Ltd. [(2023) 6 SCC 401] and India Glycols Ltd. vs. MSEFC [2023 SCC OnLine SC 1852], wherein it was held that the MSMED Act, being a special statute with overriding non-obstante clauses, prevailed over the 1996 Act and the MSEFC could therefore act as arbitrator after failed conciliation, and its orders could be challenged only under Section 34 of the 1996 Act and that writ petitions are not maintainable against MSEFC orders due to existence of a statutory remedy under Section 34. The Supreme Court observed that there is a direct conflict between Jharkhand Urja and Gujarat State Civil Supplies, and expressed reservations about India Glycols, which excludes the writ remedy even where the MSEFC’s order is passed without jurisdiction or contrary to the statutory procedure. The Court noted that Section 18 of the MSMED Act contemplates mandatory conciliation and thereafter arbitration “as if” an arbitration agreement existed, but it does not empower the MSEFC to collapse the two processes or issue directions akin to an award without proper arbitral proceedings. The Supreme Court held that writ jurisdiction under Article 226 may still be invoked where the MSEFC acts in excess of jurisdiction, in violation of natural justice, or where the order is a nullity.

In the matter of Amit Guglani & Anr.  V. L and T Housing Finance ltd. Through Managing Director & Anr.  [Arb.P. 1317/2022 and I.A. No. 19286/2022], dispute arose between the parties to a Loan Agreement wherein the Respondent disbursed the loan to the Petitioners. The dispute was primarily in relation to the Basic Prime Lending Rate (BPLR) which was increased by the Respondent after execution of the Loan Agreement. The Petitioners continuously protested through various communications, however, with no avail. The Respondent, instead of addressing the issues raised by the Petitioners, sent a legal notice followed by a notice  under Section 13(2) of SARFAESI Act, stating therein that owing to defaults in the payment of loan instalments, the loan account of the Petitioners had been classified as Non-Performing Asset and 60 days’ time was given to the Petitioners to pay the entire outstanding amounts.

The Petitioners invoked arbitration clause by directly approaching the court under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the “Act”). As per the Petitioners, they approached the Court since the Arbitration Clause envisages unilateral appointment of a sole Arbitrator by lender/Respondent No.1, which cannot be sustained in law, being in violation of Section 12(5) of the Act and the judgment of the Supreme Court in Perkins Eastman Architects DPC And Another v. HSCC (India) Limited, (2020) 20 SCC 760. As per the Petitioners, no purpose would have been achieved by sending a notice under Section 21 of the Act as the authority under the said clause suffers from a disability to appoint the Arbitrator. Petitioners also filed an IA along with the petition under section 11(6) of the Act seeking exemption from serving an invocation notice under Section 21 of the Act on the ground stated above.

Out of the two preliminary objections raised by the Respondent, one was that mandatory notice of invocation under Section 21 of the Act has not been given by the Petitioners and in the absence of mandatory notice under Section 21 of the Act, the petition deserves to be dismissed.  

The Court, after hearing both the sides on the said issue, disapproved all of the arguments raised by the Petitioners. The Court firstly reasoned that there are certain conditions that Section 11(6) of the Act comes into play when the contingencies stipulated therein occur which includes failure of a party to act as required under the procedure agreed by the parties and, it is only when the agreed procedure does not lead to appointment of Arbitrator, on account of failure on the part of either party, that jurisdiction of a Court can be invoked under Section 11(6) of the Act. Therefore, invocation of the Court’s jurisdiction under Section 11(6) presupposes initiation of procedure agreed upon by the parties under the Arbitration Clause. The Court further opined that Section 21 comes into play as a part of this procedure. A reading of the Section makes it clear that the crucial words in the provision are “the date on which a request for that dispute to be referred to arbitration” and thus, there is little room for doubt that for commencement of arbitral proceedings, either party has to make a request to the other party for reference of the dispute to Arbitration.

The Court made reference to several judgments of the Delhi High Court including Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd., (2017) SCC OnLine Del 7228, Rahul Jain and Others v. Atul Jain and Others, 2022 SCC OnLine Del 3860 and Anil Goel v. Satish Goel, 2022 SCC OnLine Del 3774. The Court affirmed that  aggrieved party has to invoke arbitration and at the very least, it has to refer to the clause in the contract which envisages reference of the dispute to arbitration. Merely sending a notice, setting out the disputes between the parties and informing the addressee that civil and criminal legal remedies would be availed in the event of failure, cannot constitute a notice invoking arbitration.” The Court further referred to the judgment in Shriram Transport Finance Company Limited v. Narender Singh, 2022 SCC OnLine Del 3412.

Applying the law as laid down by the Hon’ble High Court in the other judgments, the Court concluded that it cannot be argued by Petitioners that notice under Section 21 of the Act is not mandatory. The argument of the Petitioners that since the Arbitration Clause envisages unilateral appointment, the exercise of sending an invocation notice was futile cannot be sustained in law. The court further referred to the judgment in D.P. Construction v. Vishvaraj Environment Pvt. Ltd., 2022 SCC OnLine Bom 1410 wherein it was held that unless there is a request by a party that the dispute is to be referred to arbitration, merely stating the claims and disputes in the notice would not suffice.

The Court, in the light of the judgments, therefore, dismissed the petition under section 11(6) of the Act.