1.1 Which laws apply to arbitration in India?
The Arbitration and Conciliation Act, 1966 (“Arbitration Act”) is the primary legislation which governs arbitration in India. Subsequently, the Arbitration Act has been amended by the Arbitration and Conciliation (Amendment) Act, 2015, which came into effect on October 23, 2015 (“Amendment Act, 2015”) and the Arbitration and Conciliation (Amendment) Act, 2019 (“Amendment Act, 2019”). On November 4, 2020, the President of India has promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020 (“Ordinance”) further amending the Arbitration Act.
Principles from the Indian Contract Act, 1872 may be applied to the construction of an arbitration agreement and provisions of the Code of Civil Procedure, 1908 govern the enforcement of arbitral awards and applications to court in support of arbitral proceedings, in addition to the Arbitration Act. Various High Courts have notified rules governing the conduct of judicial proceedings like Bombay High Court (Fee Payable to Arbitrators) Rules, 2018. The rules of arbitration institutions will apply to arbitration proceedings, where institutional arbitration is adopted like the Mumbai Centre for International Arbitration (“MCIA”) Rules, 2016 or Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2018.
1.2 Is the Indian Arbitration and Conciliation Act based on the UNCITRAL Model Law?
Yes, the Arbitration Act is based largely on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980, (together, “Model Law”), but deviates from the Model Law in certain aspects.
1.3 Are there different laws applicable for domestic and international arbitration?
Currently, India has a consolidated legislation i.e. the Arbitration Act, under which Part I applies to arbitrations seated in India, and Part II relates to the enforcement of certain foreign awards, such as awards under Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention”), 1958 and the Convention on the Execution of Foreign Awards, 1923 (“Geneva Convention”). Pursuant to the Amendment Act, 2015, certain provisions of Part I of the Arbitration Act such as seeking interim relief from courts, assistance of courts in taking evidence, also apply to arbitrations seated outside of India, unless the arbitration agreement specifically excludes such an application.
1.4 Has India acceded to the New York Convention?
India signed the New York Convention on June 10, 1958 and ratified it on July 13, 1960 subjecting its applicability to the following conditions:
(i) Only awards made in the territory of another contracting state that are also notified as reciprocating territories by India would be recognised and enforced;
(ii) Only differences arising out of legal relationships, whether contractual or not, that are considered commercial under the national law would be considered arbitrable.
1.5 Can parties agree on foreign arbitration institutions (i) if both parties are domiciled in the country, (ii) if one party is domiciled in the country and the other party abroad?
The Arbitration Act provides that parties may contractually agree on the procedure for arbitration and does not stipulate restrictions on the choice of arbitration institutions even if both parties are domiciled in the country or one party is domiciled in the country and the other party abroad. Therefore, parties may choose to agree on a foreign arbitration institution. The Gujarat High Court1 held that the Arbitration Act does not per se prohibit two Indian parties from choosing a foreign seat as the seat of an arbitral proceeding. Further, the Delhi High Court2 in Dholi Spintex Pvt. Ltd v. Louis Dreyfus Company India Pvt. Ltd. has held that two Indian parties can choose a foreign law as the law governing an arbitration under the contract i.e. a different governing law for the arbitration clause, from the substantive law of the underlying contract.
1.6 Does the Indian arbitration law contain substantive requirements for the arbitration procedures to be followed?
There are no substantive requirements for the procedure to be followed under the Arbitration Act. The Arbitration Act permits the parties to agree on the procedure to be followed by the arbitral tribunal. In the event that parties are unable to agree on the procedure to be followed, then the arbitral tribunal may decide the procedure. Proceedings conducted by arbitration institutions will be governed by the procedure laid down in the institutional rules.
1.7 Does a valid arbitration clause bar access to state courts?
An arbitration clause does not operate as an absolute bar on the courts of India. If a dispute in a matter covered by a valid arbitration clause is brought to court, the court is required to refer that to arbitration, if an application to that effect is made by the defendant not later than the date of submitting the first statement on the substance of the dispute to the court. The precondition is therefore an application before the court seeking reference to arbitration.
In addition, parties may be able to approach the courts (i) for appointment (Section 11) and removal (Section 13 & 14) of arbitrators, (ii) seeking interim relief pending arbitration (Section 9), (iii) seeking extension of time for completion of arbitration proceedings (Section 29-A), (iv) seeking assistance of the court in taking evidence (Section 27), (v) seeking to set aside awards (Section 34), (vi) appeal against order of the inferior court/arbitral tribunal (Section 37) and (vii) enforcement of awards (Section 36 & 49).
The jurisdiction of Indian courts is different in cases where the arbitration is seated in India and where it is seated abroad.
1.8 What are the main arbitration institutions in India?
Arbitration institutions such as the Mumbai Centre for International Arbitration (“MCIA”), and institutions attached to various High Courts such as Delhi International Arbitration Centre (“DIAC”) in Delhi, Karnataka, Punjab and Haryana, to name a few. Apart from these, there are arbitration institutions run by the Chambers of Commerce in different states such as the Bombay Chambers of Commerce and Madras Chambers of Commerce. The Singapore International Arbitration Centre has also opened an offshore office in Mumbai given the increasing number of commercial arbitrations in India, although this office does not directly administer any India related arbitrations.
1.9 Addresses of major arbitration institutions in India?
Mumbai Centre for International Arbitration (MCIA)
20th Floor, Express Towers, Nariman Point,
Mumbai – 400021 (India)
Delhi International Arbitration Centre (DIAC)
Delhi High Court Campus Shershah Road
New Delhi – 110503
Tel: +91-11-23386492, 23386493
1.10 Arbitration Rules of major arbitration institutions?
The above-mentioned arbitration institutions have a specific set of rules which is available on their websites, as provided above.
1.11 What is/are the Model Clause/s of the major arbitration institutions?
The model clauses of the arbitration institutions are available on their respective websites. For MCIA, the following clause has been suggested as a model clause3:
“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in accordance with the Arbitration Rules of the Mumbai Centre for International Arbitration (“MCIA Rules”), which rules are deemed to be incorporated by reference in this clause.
The seat of the arbitration shall be . The Tribunal shall consist of [one/three] arbitrators).
The language of the arbitration shall be . The law governing this arbitration agreement shall be .
The law governing the contract shall be .”
The Delhi International Arbitration Centre recommends the following arbitration clause in the contracts4:
“All dispute and differences arising out of or in connection with or relating to the present agreement shall be settled under the Rules of Delhi International Arbitration Centre by one or more arbitrators appointed in accordance with its Rules.”
Note: Parties may consider adding the following:
(a) The number of arbitrator(s) shall be .
(b) The language of the arbitration proceedings shall be .
(c) Specific qualifications of the arbitrator(s) including language, technical qualifications and experience, if any.
(d) The place of arbitration shall be the Delhi International Arbitration Centre at Delhi.
1.12 How many arbitrators are usually appointed?
Under Section 10 of the Arbitration Act, the parties may choose to determine the number of arbitrators. However, such number must be an odd number. In the absence of any agreement between the parties on the number of arbitrators, a sole arbitrator is appointed.
1.13 Is there a right to challenge arbitrators, and if so under which conditions?
An arbitrator may be challenged on the following grounds:
(i) if circumstances exist that give rise to justifiable doubts as to his/her independence or impartiality, or
(ii) if he/she does not possess the qualifications agreed to by the parties.
The grounds which give rise to the above circumstances have been mentioned in the Fifth Schedule of the Arbitration Act. A separate procedure for challenging the arbitrator(s) is provided for in Section 13 of the Arbitration Act. The existence of grounds mentioned in the Seventh Schedule of the Arbitration Act render an individual ineligible to be appointed as an arbitrator.
1.14 Are there any restrictions as to the parties’ representation in arbitration proceedings?
The Arbitration Act does not impose any restrictions on the representation of parties during proceedings. However, the specific rules of the respective arbitration institution may prescribe certain restrictions.
1.15 When and under what conditions can courts intervene in arbitrations?
For arbitrations under the Arbitration Act, a court may not intervene in an arbitration proceeding except on application by either of the parties under the following circumstances:
(i) application for dispute to be referred to arbitration under Section 8 for domestic arbitrations and Section 45 for international arbitrations;
(ii) application for interim measures under Section 9, for international arbitrations as well, subject to any agreement to the contrary;
(iii) application for court to appoint arbitrator under Section 11;
(iv) application challenging the appointment of an arbitrator under Section 13;
(v) application to determine the termination of mandate of an arbitrator and appointment of a substitute arbitrator under Section 14;
(vi) application for assistance in taking evidence under Section 27;
(vii) application for seeking extension of time to complete the arbitral proceedings (Section 29-A);
(viii) application to set aside an arbitral award under Section 34;
(ix) enforcement of the award under Section 36;
(x) appeals from certain orders of the court/arbitral tribunal under Section 37;
(xi) application to order the tribunal to deliver the award to the applicant on payment to the court under Section 39;
(xii) application for jurisdiction under Section 42;
(xiii) extension of time period under Section 43;
In relation to arbitrations seated outside India, apart from points (i) (ii) and
(vi) above, a court in India may intervene in relation to the enforcement of such foreign award delivered outside India under Sections 48 and 57.
1.16 Do arbitrators have powers to grant interim or conservatory relief?
Under Section 17 of the Arbitration Act, the arbitral tribunal may, during the arbitral proceedings, at the request of a party, grant interim relief of the nature specified in the provision. The Amendment Act, 2015 has extended the scope of reliefs which may be granted by an arbitral tribunal to bring at par with the reliefs which may be granted by a Court under Section 9 of the Arbitration Act. Further, the interim orders of the arbitral tribunal are deemed to be the orders of the Court for the purpose of enforcement.
Furthermore, the rules of certain arbitration institutions also allow an arbitral tribunal to grant interim relief. For instance, under the MCIA Rules, 2016 Article 15.1 allows an arbitral tribunal to “at the request of a party, issue an order granting and injunction or any other interim relief it deems appropriate. The Tribunal may order the party requesting interim relief or provide appropriate security in connection with the relief sought.”
1.17 What are the formal requirements for an arbitral award (form; contents; deadlines; other requirements)?
• Forms and Contents
The form and contents of an arbitral award have been set out under Section 31 of the Arbitration Act. The following are the key requirements under the above provision:
• An arbitral award has to be in writing and must be signed by the members of the arbitral tribunal.
• The arbitral award must state the reasons upon which it is based, unless:
– the parties have agreed that no reasons are to be given, or
– the award is an arbitral award on agreed terms in the form of a settlement under Section 30.
• The arbitral award must provide the date and the place of arbitration.
• In the event that the arbitral award contemplates the payment of money, the award may include in the sum for which the award is made interest, at such rate of interest as considered reasonable by the tribunal and the period for which the interest is to be paid.
• Section 31 A inserted by the Amendment Act, 2015 has introduced a regime for costs. The arbitral tribunal will determine which party is entitled to costs and the amount of costs and the manner in which the costs are to be paid. The general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party.
• Deadlines for issuing arbitral awards
The Amendment Act, 2019 stipulates that the arbitral tribunal is to render its award within twelve months from the date of completion of pleadings. The Arbitration Act provides that the statement of claim and defence shall be completed within a period of six months from the date the arbitrator(s), received a written notice of their appointment. There can be a further extension of a maximum period of six months with the consent of both parties. If the tribunal is in requirement of more time for issuing an award, then either party may apply for such an extension to the Court having jurisdiction. The mandate of the arbitrator shall continue during the pendency of the application for seeking extension of the arbitral tribunal until the disposal of the said application. However, the Court is likely to grant such extension only when sufficient cause has been shown and the arbitrators may be penalized for the delay, with a proportionate reduction of their fees, if the same can be attributable to them. The above deadline for issuing arbitral award is not applicable in the case of international commercial arbitrations.
• Other formal requirements for arbitral awards
An arbitral award may be required to be stamped in accordance with applicable stamping statutes.
(a) Stamp Duties requirements
The Arbitration Act is silent on the stamping and registration of an award. However, stamping of the arbitral award is required as per the requirements of the Indian Stamp Act 1899 or the relevant state stamp duty statutes, as may be applicable. Documents which are required to be stamped will not be admissible in evidence “for any purpose” if it is not duly stamped. In addition, penalties may also be levied. The rates at which stamp duty is levied may vary across states. The Supreme Court of India in Shriram EPC Ltd v Rioglass Solar SA5 held that an award under Item 12 of Schedule I of Stamp Act, 1899 will not include a ‘foreign award’ and therefore a foreign award is not liable to incur stamp duty for its enforcement in India.
(b) Registration requirements
While the Arbitration Act is silent on registration requirements, pursuant to the Registration Act 1908, awards that purport to impact immovable property, must be registered. Failure to register a document that is mandatorily registered under the statute renders it unenforceable. The registration fee varies depending on the state in which the award is sought to be enforced.
1.18 On what conditions can arbitral awards be (i) appealed or (ii) rescinded?
There are no appeals against arbitral awards. However, Section 34 of the Arbitration Act permits a party to make an application to a court to challenge an arbitral award under the following circumstances:
(i) if a party was under some incapacity;
(ii) the arbitration agreement is not valid under law;
(iii) the party making the application was not given proper notice as required;
(iv) the arbitral award deals with a dispute not contemplated in the terms of the submission to arbitration; or
(v) the composition of the tribunal was not in accordance with the agreement of the parties.
Section 34 also permits a court to set aside an arbitral award if the court finds that the subject matter is not capable of settlement by arbitration or if the arbitral award is in conflict with the public policy of India.
Domestic awards may also be set aside if found to be vitiated by patent illegality appearing on the face of the award, provided that the award cannot be set aside on the grounds that there was an erroneous application of the law or there is a requirement for re-appreciation of evidence.
Similarly, Section 48 states that the enforcement of a foreign award may be refused under the following conditions:
(i) if the parties were under some incapacity or the agreement was not valid under the law of the country where the award was made, or the agreement was subject to;
(ii) the party against whom the award is invoked was not given proper notice as required;
(iii) the award deals with a difference not contemplated by the submission to arbitration;
(iv) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties;
(v) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country under the law of which that award was made;
(vi) the subject matter of the dispute is not capable of being settled by arbitration under the laws of India;
(vii) if the enforcement of the award would be contrary to the public policy of India.
In order to harmonise various decisions of the courts, the Amendment Act, 2015 has clarified that an award is in conflict of public policy if the making of the award was induced or affected by fraud or corruption, is in contravention of the fundamental policy of Indian Law or in conflict with the basic notions of morality or justice. However, the court shall not review the merits of the dispute in order to examine whether the award is contrary to the fundamental policy of Indian Law.
1.19 What procedures exist for enforcement of foreign and domestic awards?
1.19.1 Enforcement of Domestic Awards
Under Section 36 of the Arbitration Act, once an award is final or an application to set aside the arbitration award has been rejected, then such an award shall be executed under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the court.
Recently, the Arbitration and Conciliation (Amendment) Ordinance, 2020 was promulgated wherein it is provided that if the Court is satisfied that a prima facie is made out (a) that the arbitration agreement or contract which is the basis of the award; or (b) the making of the award, was induced by fraud or corruption, the Court shall stay the award unconditionally pending disposal of the challenge to the award.
1.19.2 Enforcement of Foreign Awards
If the court is satisfied that the foreign award is enforceable, it will be deemed to be a decree of the court. The party applying for the enforcement of the foreign award must produce the following: (a) the original award or authentic copy; (b) original arbitration agreement or authentic copy; (c) evidence necessary to prove that it is a foreign award. Further, if the award is in a foreign language, the party must produce a copy of the award that has been translated into English that is also certified by the diplomatic or consular agent of such country.
The Supreme Court in M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd, held that under the Arbitration Act a foreign award is already stamped as the decree. It observed that, “In one proceeding there may be different stages. In the first stage the Court may have to decide about the enforceability of the award having regard to the requirement of the said provisions. Once the court decides that foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There arises no question of making foreign award as a rule of court/decree again.”
1.20 Can a successful party in the arbitration recover its costs?
The Amendment Act, 2015 has introduced Section 31 A which is a regime of costs. While the arbitrators will determine whether costs are payable by one party to another, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. The tribunal may make a contrary award by recording its reasons in writing.
Any agreement which has the effect that one of the parties has to pay the whole or part of the costs of the arbitration in any event shall only be valid if such agreement is made after the dispute in question has arisen.
Each arbitration institution will also have separate rules governing costs. For instance, under the MCIA Rules, Rule 32.6 of the MCIA Rules defines “costs of the arbitration” to include: “(a) The Tribunal’s fees and expenses and the Emergency Arbitrator’s fees and expenses, where applicable; (b) the MCIA’s administrative fees and expenses; and (c) the costs of expert advice and of other assistance reasonably required by the Tribunal.” Rules 32 and 33, inter alia, provide for detailed rules on fixing the aforementioned “costs of the arbitration”, including directing parties to make advance payments of such costs. The Registrar of the MCIA has the ultimate power to determine the costs and their payment, including directing payment of advance on the costs. Rule 29, inter alia, however, allows for the arbitral tribunal to make orders on apportionment of costs between the parties.
1.21 Are there any statistics available on arbitration proceedings in the country?
A 2013 PWC study found that 47% of Indian companies that had chosen arbitration as their preferred method of dispute resolution chose ad hoc proceedings6. Despite the presence of arbitral institutions in India, many arbitrations involving Indian parties are administered by international arbitral institutions such as the Court of Arbitration of the International Chamber of Commerce, the Singapore International Arbitration Centre and the London Court of International Arbitration7. Despite the existence of numerous arbitral institutions in India, parties in India prefer ad hoc arbitration and regularly approach courts to appoint arbitral tribunals under the relevant provisions of the Arbitration Act.
India has an estimated 42 million cases pending in various courts. As of 01.01.2021 there were 65,086 cases pending in the Supreme Court of India8, around 5.6 million cases are pending in the High Courts9 and around 37 million pending before the subordinate judiciary 10.
1.22 Are there any recent noteworthy developments regarding arbitration in the country (new laws, new arbitration institutions, significant court judgments affecting arbitration etc.)?
1.22.1 Proposed Legislative Changes to The Arbitration Act
The government introduced new amendments via the Amendment Act, 2019. The highlights of the Amendment Act, 2019 are as follows:
a) Appointment of Arbitrators
Any request for appointment of arbitrator (s) is required to be disposed within thirty days from the date of service of notice on the opposite party. Parties can approach designated arbitration institutions for the appointment of arbitrators. For international commercial arbitrations, the appointments will be made by institutions designated by the Supreme Court of India. For domestic arbitrations, appointments will be made by the institution designated by a High Court. In the event there are no designated arbitral institutions available, the Chief Justice of the concerned High Court will maintain a panel of arbitrators to perform the functions of the arbitral institutions.
b) Arbitration Council of India
The Amendment Act, 2019 provides for the establishment of a statutory authority called the ‘Arbitration Council of India’ (“the ACI”). The ACI will, inter alia, identify and grade qualifying arbitration institutions to be considered for designation, by High Courts or the Supreme Court for appointment of arbitrators.
c) Relaxation of time-lines
The Amendment Act, 2019 mandates the filing of statement of claim and statement of defence within six months of the constitution of the arbitral tribunal. The arbitration award must be passed by the arbitral tribunal within twelve months from the date of completion of pleadings.
d) Confidentiality of proceedings
The Amendment Act, 2019, provides for an express confidentiality provision requiring the arbitrator, arbitral institution and the parties to the arbitration agreement to maintain confidentiality of all arbitral proceedings except the award where its disclosures are necessary for the purpose of implementation and enforcement of the award. The Amendment Act, 2019 also provides for an express provision on immunity of arbitrators.
On November 4, 2020, the President of India promulgated the Ordinance. Key features of the Ordinance include:
a. Automatic Stay on arbitral awards:
The Ordinance provides that an unconditional stay can be granted on the enforcement of an arbitral award (even during the pendency of the setting aside application) if the Court is satisfied on a prima facie basis that: (i) the underlying arbitration agreement or contract, or; (ii) the making of the arbitral award, was induced or effected by fraud or corruption.
b. Qualification of Arbitrator:
The Arbitration Act specified certain qualifications, experience and accreditation norms for arbitrators in the Eighth schedule. The Ordinance omits the Schedule for arbitrators and states that the qualifications, experience, and norms for accreditation of arbitrations will be specified by regulations.
1.22.2 Recent Supreme Court Decisions in relation to Arbitration
In Government of India v. Vedanta Ltd. & Ors.11 , the Supreme Court enforced a Malaysian seated foreign award under Section 47 of the Arbitration Act passed in favour of Vedanta Ltd. and against the Government of India. The Supreme Court inter alia held that the period of limitation for filing a petition for enforcement of a foreign award under Sections 47 and 49 of the Act, would be governed by Article 137 of the Limitation Act, 1963, which prescribed a period of three years from ‘when the right to apply accrues’. In case of delay, a party may file an application under Section 5 of the Limitation Act, 1963, for condonation.
The Supreme Court of India in the case of Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Ltd.12 ruled on the issue of arbitrability of disputes involving questions of fraud. The Court held that arbitration can be refused only where ‘serious allegations of fraud’ are involved and further set out two tests to identify such ‘serious allegations of fraud’.
Test 1: When the arbitration clause or agreement itself cannot be said to exist. For e.g., where the party against whom breach is alleged cannot be said to have entered into the agreement relating to arbitration at all.
Test 2: In cases where allegations are made, against the State or its instrumentalities, of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case by a writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.
The Court further held that the judgment in N. Radhakrishnan v. Maestro Engineers13, which had held that allegations of fraud are not arbitrable, lacks precedential value and cannot be applied as a precedent for application of the fraud mantra to negate arbitral proceedings.
In Vijay Karia & Ors. v Prysmian Cavi e Sistemi S.r.l & Ors.14, the Supreme Court held that a foreign award may be enforced even if inconsistent with the provisions of the Foreign Exchange Management Act, 1999 (“FEMA”). The court held that a violation of the fundamental policy of Indian law must amount to a breach of some legal principles or legislation which is so basic to Indian law that is not susceptible of being compromised. These would be the core values of India’s public policy as a nation, reflected not only in statutes but also time-honoured, hallowed principles which are followed by the Courts. The Supreme Court held that a breach under FEMA can never be held to be a violation of the fundamental policy of Indian law since an approval or permission could subsequently be obtained from the Reserve Bank of India for the transaction.
In BGS SGS Soma JV v. NHPC Ltd.15, the Supreme Court held that when parties have selected a seat of arbitration, or if the arbitral tribunal has determined a seat, such a determination automatically confers jurisdiction on the courts at such seat of arbitration for the purposes of interim orders and challenges to an award. The Supreme Court further held that when a seat has not been designated by the arbitration agreement, and only a convenient venue has been designated, an application under Section 9 may then be preferred in any court where a part of the cause of action has arisen. The earlier court before which an application has been made would be deemed the court having exclusive jurisdiction and all further applications must lie before this court by virtue of Section 42 of the Arbitration Act. The Court held that in the absence of any contrary indications, the designation of a ‘venue’ in an arbitration clause can indicate the ‘seat’ of the arbitration, while holding that the decision in Hardy Exploration16 is not good law as it did not follow the ‘Shashoua Principle’ which was confirmed by the Constitution Bench of the Supreme Court in Bharat Aluminium Company v. Kaiser Aluminium Technical Service Inc. & Ors.17
In Hindustan Construction Company Limited v. NHPC Limited18, the Supreme Court relied upon its decision in BGS SGS Soma to state that as New Delhi was the chosen seat of arbitration between the parties, all applications under Part I of the Arbitration Act were to be made only before the courts at New Delhi.
In Patel Engineering Ltd. v. North Eastern Electric Power Corporation Ltd.19, the Supreme Court held that patent illegality, as a ground for setting aside an award, has been given a statutory force in Section 34(2A) of the Arbitration Act. However, this ground cannot be invoked in international commercial arbitrations seated in India or for resisting enforcement of a foreign award under Section 48 of the Arbitration Act. In case the decision of an arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at the same, or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view, the arbitral award can be challenged on the grounds of patent illegality.
In Vidya Drolia and Ors. v. Durga Trading Corporation20, the Supreme Court held that landlord-tenant disputes under the Transfer of Property Act, 1882 are arbitrable as they pertain to rights in personam. However, the Supreme Court clarified that landlord-tenant disputes which are covered and governed by rent control legislation would not be arbitrable, as a specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations in those situations. The Court also held that disputes relating to mortgage under the TP Act were incapable of being settled by Arbitration since they involved rights in rem as opposed to rights in personam. Placing reliance on this judgement the Supreme Court in Suresh Shah v. Hipad Technology India Private Limited21 further held that disputes relating to lease/tenancy agreements governed by the TP Act are also arbitrable.
The N.N. Global Mercantile Pvt. Ltd. v Indo Unique Flame Ltd. & Ors.22, the Supreme Court disagreed with it’s earlier decisions wherein it had held that the statutory bar contained in Section 35 of the Indian Stamp Act, 1899 would also render the arbitration agreement contained in such an instrument as being non-existent, unenforceable, or invalid, pending payment of stamp duty on the substantive contract / instrument. This issue has now been referred to a larger bench as the court was of the view that non-payment of stamp duty on the substantive contract will not invalidate the arbitration agreement contained in the said contract. The Supreme Court relied on the doctrine of severability to hold that the arbitration clause would survive independently of the substantive contract. As a consequence, the Supreme Court’s earlier decision in SMS Tea Estates was over-ruled as it does not lay down the correct position in law on the following two issues: (i) that an arbitration agreement in an unstamped commercial contract cannot be acted upon, or is rendered un-enforceable in law; and (ii) that an arbitration agreement would be invalid where the contract or instrument is voidable at the option of a party, such as under Section 19 of the Indian Contract Act, 1872.
In Dr. Bina Modi v. Lalit Kumar Modi23, the Delhi High Court held that issues under the Trusts Act cannot be the subject matter of arbitration. Relying upon Vimal Kishor Shah v. Jayesh Dinesh Shah24, the court held that disputes relating to trust, trustees and beneficiaries arising out of the trust deed and the Trusts Act, 1882 are not capable of being decided by the arbitrator despite existence of arbitration agreement to that effect between the parties. It was further held that the court would have jurisdiction to grant an anti-arbitration injunction where the party seeking the injunction can demonstrate that the agreement is null and void, inoperative or incapable of being performed.
In GE Power Conversion India Private Limited v. PASL Wind Solutions Private Ltd.25, the Gujarat High Court held that the Arbitration Act does not per se prohibit two Indian parties from choosing a foreign seat as the seat of an arbitral proceeding. Such an agreement would not violate the Act, the public policy of India or the Indian Contract Act, 1872. It further held that the nationality of the parties has no relevance for considering the applicability of Part II of the Act, which is solely based on whether the foreign seat of arbitration is signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958. If this requirement is fulfilled, Part II of the Act will be applicable.
In Dholi Spintex Pvt. Ltd v. Louis Dreyfus Company India Pvt. Ltd.26, the Delhi High Court held that an arbitration agreement/clause is independent of the underlying contract. Accordingly, the parties may choose a different governing law for the arbitration clause, from the substantive law of the underlying contract. The High Court also clarified that two Indian parties can choose a foreign law as the law governing an arbitration under the contract.
1 GE Power Conversion India Pvt. Ltd. v. PASL Wind Solutions Pvt. Ltd., Arb. Pet. 131 & 134 of 2019.
2 Dholi Spintex Pvt. Ltd v. Louis Dreyfus Company India Pvt. Ltd., 2020 SCC Online Del 1476.
5 Shriram EPC Ltd v Rioglass Solar SA, (2018) 18 SCC 313.
6 pwc.in/assets/pdfs/publications/2013/corporate-attributes-and-practices-towards-arbitration-in- india.pdf
Report of the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf.
11 Government of India v. Vedanta Limited & Ors., 2020 SCC OnLine SC 749.
12 Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Ltd., 2020 SCC Online SC 656.
13 N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72.
14 Vijay Karia & Ors. v Prysmian Cavi e Sistemi S.r.l & Ors, 2020 SCC OnLine SC 177.
15 BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234.
16 Union of India v. Hardy Exploration and Production (India) Inc., 2019 (13) SCC 472.
17 Bharat Aluminium Company v. Kaiser Aluminium Technical Service Inc. & Ors., 2012 (9) SCC 552.
18 Hindustan Construction Company Limited v. NHPC Limited, 2020 SCC OnLine SC 305.
19 Patel Engineering Ltd. v. North Eastern Electric Power Corporation Ltd., AIR 2020 SC 2488.
20 Vidya Drolia and Ors. v. Durga Trading Corporation, 2020 SCC OnLine SC 1018.
21 Suresh Shah v. Hipad Technology India Private Limited, 2020 SCC OnLine SC 1038.
22 N.N. Global Mercantile Pvt. Ltd. v Indo Unique Flame Ltd. & Ors., Civil Appeal Nos.3802 – 3803/2020.
23 Dr. Bina Modi v. Lalit Kumar Modi, 2020 SCC Online Del 1678.
24 Vimal Kishor Shah v. Jayesh Dinesh Shah, (2016) 8 SCC 788.
25 GE Power Conversion India Private Limited v. PASL Wind Solutions Private Ltd., Arb. Pet. 131 & 134 of 2019.
26 Dholi Spintex Pvt. Ltd v. Louis Dreyfus Company India Pvt. Ltd., 2020 SCC Online Del 1476.