P. N. Bhagwati was born in Gujarat. His father was Justice Natwarlal H. Bhagwati, a Supreme Court judge. He was the brother of the economist Jagdish Bhagwati and the neurosurgeon S. N. Bhagwati. He was married to Prabhavati (née Shethji) and the couple have three daughters, Parul, Pallavi, and Sonali.
Bhagwati received his education in Mumbai. He studied at Elphinstone College, taking a Mathematics (Hons.) degree from Bombay University in 1941. In 1942, he courted arrest during the Indian Independence Movement and went underground for four months. He later received a law degree from Bombay University after studying at Government Law College, Bombay.
Bhagwati began his career practicing at the Bombay High Court. In July 1960, he was appointed a judge of the Gujarat High Court. In September 1967, he was appointed the Chief Justice of that court. On two occasions, he acted temporarily as Governor of Gujarat (7 December 1967 to 25 December 1967 and 17 March 1973 to 3 April 1973 In July 1973, he was appointed a Judge of the Supreme Court of India. In August 1985, he became Chief Justice of India.
As a supreme court judge, Bhagwati introduced the concepts of public interest litigation and absolute liability to the Indian judicial system. He is therefore held, along with Justice V. R. Krishna Iyer, to have pioneered judicial activism in the country.
In 2007 Bhagwati was awarded the Padma Vibhushan in public affairs, India's second highest civilian award.
A controversial judgment of Bhagwati was in the ADM Jabalpur v. Shivkant Shukla case (popularly referred to as the ADM Jabalpur case or the habeas corpus case) where he decreed that during the Emergency of 1975 to 1977, a person's right to not be unlawfully detained (i.e. habeas corpus) can be suspended. This judgment received a lot of criticism since it reduced the importance attached to Fundamental Rights under the Indian Constitution. Going against the previous decision of High Courts, the bench which included Bhagwati concluded in favour of the then Indira Gandhi government while only Justice Hans Raj Khanna was opposed to it. Bhagwati openly praised Indira Gandhi during the Emergency period, later criticized her when Janata Party-led government was formed and again backed Gandhi when she got re-elected to form government in 1980. Bhagwati was criticized for these change of stands, favouring the ruling government, which were deemed as to have been taken to better his career prospects. Bhagwati later in 2011 agreed with popular opinion that this judgement was short-sighted and "apologised".
Maneka Gandhi was requested, through an official letter from the Regional Passport Officer, Delhi on 2 July 1977 to return her passport within seven days "in public interest" under section 10(3) of The Passports Act (1967). Gandhi, who had been issued Indian passport on 1 June 1976, in return asked the office to give statement of reason in accordance with section 10(5) to which the office replied that "in the interest of general public" the Government had decided to not furnish any such statement further. Under Article 21 of the Indian Constitution, which deals with Right to Freedom, Gandhi filed a writ petition in which Bhagwati and Justice V. R. Krishna Iyer ruled in favour of Gandhi.
In 1982, Bhagwati was elected a fellow of the American Academy of Arts and Sciences while being affiliated with the Columbia University. He had been a member of the United Nations Human Rights Committee from 1995 to 2009, being reelected after every two year on expiry of his term. He was also chairman of the committee in 2001-03. As of 2006, he had also served as a member of the Committee of Experts of the International Labour Organisation for over 27 years. He was appointed Chancellor of Sri Sathya Sai Institute of Higher Learning on 6 May 2011.
Justice Bhagwati died on 15 June 2017 at the age of 95 after brief illness at this home in New Delhi. His funeral was held on 17 June. Prime Minister Narendra Modi condoled his death calling him "stalwart of India's legal fraternity".