The Kerala High Court declared the arbitral award in question as void and observed that there is no enabling provision under the Arbitration and Reconciliation Act, 1996 which enables the opposite party to seek arbitration of entire disputes once the other party expresses his intention to arbitrate only on a specific dispute.

The appeal before the High Court arose from an order of the District Court by which the award of the arbitral tribunal was set aside.

The Division Bench comprising Justice Dr.A.K. Jayasankaran Nambiar and Justice Easwaran S. asserted, “Equally so, we are not impressed by the argument of the learned counsel for the appellant that when one party to the contract refers a particular dispute to arbitration, the entire disputes between the parties open up for arbitration.”

Advocate G.P. Shinod represented the Appellants while Senior Government Pleader K.V. Manojkumar represented the Respondents.

Factual Background

The appellant-contractor came out successful in a competitive bidding for the execution of the work pertaining to the Kerala State Transport Project. Several disputes arose between the contractor and the State during the implementation of the Contracts. The appellant sought a reference to the adjudicator. None of the parties sought reference of the disputes to the arbitrator by invoking the arbitration clause under the agreement within the stipulated 28 days as provided under the contract. However, the State, after a period of 28 days, sought a reference of one of the disputes.

The Arbitral Tribunal went into the core of the disputes between the parties and answered all the four disputes in favour of the contractor-appellant and overturned the decision of the adjudicator. Aggrieved by the award, the State invoked the jurisdiction of the District Court under Section 34 of the Arbitration and Reconciliation Act, 1996. The District Judge by the order impugned set aside the award passed by the Arbitral Tribunal and restored the award of the adjudicator. Aggrieved thereby, the appellant-contractor approached the High Court.

Reasoning

On a perusal of the contract, the Bench noted that it was stated in one of the clauses that if either party does not refer the dispute to the arbitrator within a period of 28 days from the date of receipt of the award of the adjudicator, then, it becomes final. “Certainly, it appears that the aforesaid clause putting restraint on initiation of legal proceedings within the period of 28 days, offends the general law of limitation under Article 137 of the Limitation Act, 1963”, the Bench said.

Referring to clause (b) of Section 28 which says that any agreement which extinguishes a right of a party in respect of a contract on expiry of a specified period so as to restrict the other party from enforcing the right, is void to that extent, the Bench held that ex facie Clause 25.2 of the Contract offended the provisions of Section 28(b) of the Contract Act, 1872.

The Court further highlighted the aspect that before initiation of proceedings of Arbitration, it is mandatory to issue a notice under Section 21 of the Arbitration and Reconciliation Act, 1996. It was clear from the facts of the case that the appellant never sought for reference of the disputes under the provisions of the Arbitration and Reconciliation Act, 1996 by issuing any notice as provided under Section 21. On the contrary, it was the State which sought reference before the Arbitrator for adjudication of the first dispute.

“Once the parties concur on the number of arbitrators to arbitrate upon the disputes, then the procedure under Section 23 of the Act triggers. It is true that Section 23 enables one of the parties to the dispute to raise his claim in its entirety. However read as may be, we could not find any enabling provision under the Act which enables the opposite party to seek arbitration of entire disputes once the other party expresses his intention to arbitrate only on a specific dispute”, it held.

“...the arbitral tribunal was appointed at the request of the State to adjudicate on dispute no. (1) alone. The appellant never intended to raise any dispute regarding point Nos. (2) to (4) by issuing a separate notice under Section 21 of the Act. The assumption that where one-party files an application and gets an arbitrator appointed, the other party can raise all such disputes under the contract before the arbitrator is baseless, especially when the law governing the arbitration specifically provides that the arbitrator can decide only such dispute referred before him and not otherwise. To hold otherwise will certainly do violence to the statute”, the Bench further added.

The High Court found that the arbitral tribunal had exceeded its jurisdiction in deciding the entire dispute. Perhaps the appellant was under a mistaken impression with regard to its right to have the entire dispute opened for arbitration. Finding that the tribunal exceeded its jurisdiction while rendering the award, the Bench held the same to be void and dismissed the Appeal.

Cause Title: M/S. Bhageeratha Engineering Ltd. v. State Of Kerala (Neutral Citation: 2025:KER:337)

Appearance:

Appellant: Advocates G.P. Shinod, Manu V., George Thomas

Respondent: Senior Government Pleader K.V. Manojkumar

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Kerala HCJustice AK Jayasankaran NambiarJustice Easwaran S.

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.