Section 21 of Arbitration and Conciliation is mandatory or Directory?

What is Section 21 Notice?

Section 21 of the Arbitration and Conciliation Act (“the Act”) is procedural notice wherein arbitration is said to officially begins on the date this notice is received by the other side. It starts as the limitation clock (deadline to file claims) and is a prerequisite before any party can approach a court to appoint an arbitrator under section 11 of the Act.

Bhagheeratha Engineering Limited vs. State of Kerala 2026 SCC OnLine SC 5

Supreme Court of India in Bhagheeratha Engineering Limited vs State of Kerala has recently clarified section 21 of the Act which is a procedural in nature and serves only to determine the commencement of arbitral proceedings for the purpose of limitation.

In the case, Bhagheeratha Engineering (“company”) had 4 disputes with the Kerala Government over road contracts. Before going to arbitration, they had to follow step by step process wherein first they have to approach an engineer, then an adjudicator and then arbitration.

Adjudicator

While the adjudicator decided some disputes in favor of the company, some against. Kerala government was still unhappy with one decision and asked for an arbitral tribunal to set up. The tribunal heard all 4 disputes and ruled in the company’s favor, awarding ₹ 2 crore.

High Court

To this, the Kerala Government’s contentions were that they know sent a formal notice which is called a section 21 notice for one of the disputes and not for disputes 2,3 and 4. So the Tribunal had no right to decide those. The High Court agreed with Kerala government and set aside the award for Disputes 2-4.

Supreme Court

The Supreme Court disagreed and restored the award stating that Section 21 notice only matters for calculating limitation and nothing more. It is Procedural and not jurisdictional therefore not a gateway to power. Since arbitration clause covered “any dispute arising out of contract”, all 4 disputes were always eligible for arbitration.

Conclusion

There have been numerous contradictions with respect to Supreme court holdings of Section 21 of the Act in an earlier ruling Advaya Projects Pvt Limited v. Vishal Structural Private Limited, the supreme Court said the Section 21 notice is mandatory. In the case of BSNL v. Nortel, SC also linked Section 11 applications directly to section 21 notice – meaning one cannot even ask a court to appoint an arbitrator without first sending this notice. Thus, through Bhagheeratha, the supreme court made sure that Procedural matters do not become a leeway to delay or overturn an award and do take a hyper technical approach. However due to various contradictions with respect to it, experts have suggested that Supreme Court should take a conclusive approach with a larger judge bench as to whether Section 21 is Mandatory or Directory.

KEY TAKEAWAY

Sending a proper Section 21 notice before starting arbitrations is always better than leaving a scope for more litigation.

REFERENCES

Cases

1. Bhagheeratha Engineering Limited v. State of Kerala, 2026 SCC OnLine SC 5 (India).

2. Adavya Projects Private Limited v. Vishal Structurals Private Limited, (Supreme Court of India) (India).

3. Bharat Sanchar Nigam Ltd. v. Nortel Networks India Private Limited, (2021) 5 SCC 738 (India).

Legislation

4. The Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India).

5. The Arbitration and Conciliation Act, 1996, § 11, No. 26, Acts of Parliament, 1996 (India).

6. The Arbitration and Conciliation Act, 1996, § 21, No. 26, Acts of Parliament, 1996 (India).

Secondary Sources

7. Maheshwari & Co., Section 21 of the Arbitration and Conciliation Act, Maheshwari & Co. Blog, https://www.maheshwariandco.com/blog/section-21-of-the-arbitration-and-conciliation-act/ (last visited Mar. 25, 2026).

8. Sidharth Sethi, Shreya Sircar, Deepank Anand & Shivangi Pathak, Bhagheeratha Engineering Limited vs. State of Kerala — Section 21 Notice Not a Mandatory Precondition, JSA, Lexology (2026), https://www.lexology.com (last visited Mar. 25, 2026).