Yearly Rewind 2024: Arbitration

2. Signatory director cannot be made party to arbitration under ‘Group of companies’ doctrine (January) (read our thoughts on the issue here) 

In ‘Vingro Developers Pvt. Ltd. v. Nitya Shree Developers Pvt. Ltd.’, the High Court of Delhi clarified that a signatory director to an agreement cannot be made party to the arbitration proceedings under the ‘Group of companies’ doctrine.  

The Court observed that the relationship between the directors of the company, who were also impleaded as parties to the case, and the company itself is akin to that of a principal and agent, as defined under the Indian Contract Act, 1872. Consequently, in the absence of any clear intention to bind a non-signatory to the agreement between the parties, the directors cannot be impleaded or held bound by the arbitration agreement.  

3. Incorrect reference to the repealed Arbitration Act, 1940, does not render the entire arbitration agreement invalid (February) 

In ‘ICDS Ltd. v. Sri Bhaskaran Pillai & Ors.,’ the Karnataka High Court ruled that an arbitration agreement which erroneously references the repealed Arbitration Act, 1940, despite being entered into after the Arbitration Act, came into effect, does not render the agreement invalid. It has clarified that even if such agreements mistakenly refer to the provisions of the 1940 Act, such references are inconsequential, and the arbitration proceedings must necessarily be governed by the provisions of the Arbitration Act. 

4. Condonation of delay cannot be applied for challenging arbitral award beyond statutory limitation (February)  

In ‘Board of Trustees of Deendayal Port Trust and Anr. v. Optart Electronics Pvt. Ltd.’, the High Court of Gujarat ruled that the time-period of 3 months provided as limitation under section 34 of Arbitration Act to challenge a domestic arbitral award can only be extended for 30 days. The Court held that a request to condone delay beyond 30 days cannot be made when the law explicitly states that the time limit of 3 months cannot exceed by more than 30 days. 

5. Three years’ limitation applicable on appointment of arbitrator (March) 

In ‘Arif Azim Co. Ltd. v. Aptech Ltd.’, the SC held that an application for the appointment of an arbitrator must be filed within three years from the date on which the right to apply arises. This right arises when a valid notice invoking arbitration is issued by one party to the other, and the other party either fails or refuses to comply with the agreed-upon appointment procedure outlined in the notice. 

6. For parties to be referred to arbitration, there must be a specific and conscious incorporation of an arbitration clause from another contract (March) (read our thoughts on the judgment here) 

The SC in ‘NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd.’, clarified the law on specific reference to the arbitration clause present in another document. The Court held that even when a principal document states all terms and conditions of a reference document shall apply on an ‘as-is’ basis, yet it shall not amount to incorporation of an arbitration clause from the reference document. To incorporate the arbitration clause, a specific reference of incorporating the dispute resolution mechanism from the reference document must be made in the principal document. The reference must be specific to the dispute resolution mechanism and a general reference incorporating all terms and conditions will not amount to valid incorporation of arbitration clause.  

7. Arbitration agreement gets precedence over Facilitation Council in determining the seat/venue (March) 

The Calcutta High Court in ‘Odisha Power Generation Corporation Ltd. v. Techniche Consulting Service and Ors.’ ruled that an arbitration agreement between parties and the venue they have chosen will not be overridden by the MSMED Act. The Court clarified that the arbitration conducted by the Facilitation Council does not take precedence over the arbitration agreement between the parties or alter the agreed-upon seat/venue.  

8. Enforcement of foreign awards may be refused for bias only in exceptional circumstances (March) 

In ‘Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited’, the SC, while allowing the enforcement of a foreign arbitral award, emphasized the need to assess allegations of arbitral bias using international standards rather than domestic ones. The Court observed that the enforcement of a foreign award should be denied on the grounds of bias only in exceptional circumstances. 

The Court further remarked that India must adhere to a narrow and globally accepted interpretation of public policy, particularly when addressing claims of bias, to strengthen its standing as a reliable jurisdiction for arbitration. 

9. Arbitral award can be set aside under curative jurisdiction of the SC (April) (read our thoughts on the judgment here) 

In ‘Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd.‘, the SC, in a first, invoked its curative jurisdiction to set aside an arbitral award of INR 75 billion. The SC, which had earlier on two occasions upheld the same award, now found the award perverse due to an unreasonable interpretation of the termination clause and disregard of key evidence. This unprecedented move has raised concerns about the finality of arbitral awards in India. 

10. If a subsequent settlement agreement does not have an arbitration clause, parties cannot be referred to arbitrate under the original document (April) 

The Delhi High Court, in ‘Larsen and Turbo Ltd. v. Ireo Victory Valley Pvt. Ltd.’ ruled that when an original contract is superseded by a mutual settlement agreement, the arbitration clause of the original contract is no longer enforceable. As the settlement agreement addresses the full and final settlement of all claims it shall be treated as a foreclosure document. The Court noted that parties cannot use the arbitration mechanism as a straw to escape liabilities stemming from the subsequent agreement, in this case, the settlement agreement. It is noteworthy that the Court has looked into the nature of the settlement agreement to understand that it is a final document/foreclosure document, and all claims prior to it shall be subject to it.  

The SC in ‘Dani Wooltex Corporation and Ors. v. Sheil Properties Pvt. Ltd. & Anr.’, clarified that the power under Section 32(2)(c) of the Arbitration Act can only be exercised when the continuation of the proceedings has genuinely become unnecessary or impossible. The Court further noted that the claimant’s failure to request the tribunal to set a hearing date does not, by itself, justify the conclusion that the proceedings have become unnecessary.  

12. Government of India pushes for mediation over arbitration in domestic public procurement contracts (June) (read our thoughts on the issue here) 

On 03 June 2024, the Department of Expenditure under the Ministry of Finance, Government of India, issued guidelines outlining the use of arbitration and mediation in domestic public procurement contracts. The guidelines recommend limiting arbitration to disputes valued at less than INR 100 million. For disputes exceeding this threshold, the inclusion of arbitration clauses should be carefully evaluated. The guidelines further emphasize that where arbitration is used, institutional arbitration should be prioritized, taking into account its cost-effectiveness in relation to the value of the dispute. 

13. Disputes on ‘Lock-in’ period of employees are arbitrable (July) 

In ‘Lily Packer Pvt. Ltd. v. Vaishnavi Vijay Umak’, the Delhi High Court ruled that disputes pertaining to ‘Lock-in’ periods in employment contract, during the subsistence of employments contracts, are arbitrable. The Court also validated the legality of the lock-in period and other negative covenants during the subsistence of the employment contract. 

14. Date for conversion of foreign currency is date when arbitral award attains finality (August) (read our thoughts on the judgment here) 

In ‘DLF Ltd. & Anr. v. Koncar Generator & Motors Ltd.’, the SC formulated twin principles for determining the appropriate foreign exchange rate in cases where the arbitral award is expressed in foreign currency for the purpose of enforcement. It was ruled that the relevant date for conversion of foreign currency into INR is the date on which the arbitral award attains finality. In the case that the award amount or part of it is deposited in court pending objections, the date of such deposit shall be the relevant date for conversion.  

15. A legible arbitration clause on the reverse of a delivery challan can be the basis for appointing the arbitrator (August) 

In ‘Goyal MG Gases Pvt. Ltd. v. EDAC Engineering Ltd.’, the Delhi High Court ruled that the arbitration clause contained on the reverse of the delivery challan can be a basis for seeking reference of the dispute to arbitration.  

16. Extension applications can be moved after the expiry of arbitral mandate (September) (read our thoughts on the judgment here)  

In ‘Rohan Builders (India) Pvt, Ltd. v Berger Paints India Ltd.’, the SC held that an application to extend the time for making an arbitral award in domestic arbitration proceedings beyond the statutory mandate is maintainable even if the parties file such an extension application after the expiry of the mandate.  

17. Fundamental policy of Indian law extremely narrow, applicable only in exceptional cases (September) (read our thoughts on the judgment here) 

In ‘OPG Power Generation Pvt. Ltd. v. Enexio Power Cooling Solutions India Pvt. Ltd. & Anr.’, the SC held that under Section 34 of the Arbitration Act, the court does not act as an appellate body over arbitral awards. The arbitrator is the ultimate authority on the quantity and quality of evidence, and their factual determinations should be respected. The Court held that awards lacking reasons or with unclear reasoning violate the Arbitration Act and may be set aside. Where reasons reflect a flaw in the decision-making process, the award can be challenged. However, if reasons are given but are insufficient, the court must carefully assess the nature of the issues and review the award and supporting documents. If the reasons, upon a fair reading, are intelligible and adequate, the award will stand. However, if gaps in reasoning make the award unclear or unsupported, the court may set it aside. 

18. Misconduct before an arbitral tribunal amounts to contempt of court (October) (read our thoughts on the judgment here)  

The Delhi High Court in ‘Dalmia Family Office Trust & Anr. v. Getamber Anand & Ors’, has ruled that misconduct with the arbitrator and baseless allegations made against the independence of an arbitrator amounts to contempt of court. The Arbitral Tribunal can punish for its contempt by referring contempt petition to the relevant High Court and then the High court shall pass an order for contempt of court committed against the arbitral tribunal. In the present case, the Court punished the defaulting parties for the contempt before the arbitral tribunal by misconduct.   

19. Unilateral appointment of arbitrator violative of equal treatment of parties, even at the stage of appointment of arbitrators (November) (read our thoughts on the judgment here)  

In ‘Central Organization for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)’, the SC ruled that public sector undertakings (PSUs) are not prohibited from creating panels of potential arbitrators. However, the other party cannot be compelled to choose an arbitrator from the PSU’s panel. The Court also observed that a clause allowing one party to unilaterally appoint a sole arbitrator raises concerns about the independence and impartiality of the arbitrator. Such a unilateral clause limits the other party’s equal participation in the appointment process.  

The Court clarified that this ruling would apply prospectively, meaning it would affect only arbitrator appointments made after the date of the judgment, and is applicable to three-member tribunals. 

20. Singapore International Arbitration Centre releases new arbitration rules focusing on efficiency and transparency (December) (read our thoughts on the issue here) 

On 09 December 2024, the Singapore International Arbitration Centre (SIAC) released the 7th edition of its arbitration rules, known as the 2025 SIAC Arbitration Rules, updating the previous 2016 version. The new rules introduce provisions like the Preliminary Determination Procedure, Streamlined Procedure, and detailed guidelines on third-party funding and security for costs or claims, to address the modern challenges in arbitration.