This reference guide provides an in-depth analysis on the subject of international arbitration within the Indian jurisdiction and was first published in the GLI – International Arbitration 2023 (9th edition).
India consolidated its law on arbitration in 1996 by enacting the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), which is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 (“Model Law”). The Arbitration Act has thereafter been amended on multiple occasions, in 2015, 2019, and 2021 to streamline the arbitration practice, safeguard the autonomous nature of arbitration proceedings, and align the law with the best international practices.1
Part I of the Arbitration Act deals with domestic and international commercial arbitrations seated in India. Part II deals with foreign seated arbitrations and enforces the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (“New York Convention”), as well as the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927. Part III and Part IV of the Arbitration Act deal with conciliation and certain supplementary provisions, respectively.
When signing the New York Convention, India adopted the following reservations:
- India will apply the New York Convention only to recognise and enforce awards made in the territory of another contracting State; and
- India will apply the New York Convention only to differences arising out of legal relationships, whether contractual or not, that are considered commercial under the national law.
The Arbitration Act is a complete code and governs the procedural rights of parties as well as the conduct of arbitration proceedings. Over the years, India has experienced an interesting trajectory with respect to the development of its arbitration jurisprudence. Traditionally, Indian courts were infamous in the international arbitration community for adopting ambivalent standards to interfere with arbitration proceedings and arbitral awards, in a manner inconsistent with internationally accepted standards. However, in recent times, there has been a change in the legislative and judicial intent in India to adopt a pro-arbitration approach. This is reflected both in the Arbitration Act, which has been amended on multiple occasions in the past decade, as also in various judgments pronounced by the Hon’ble Supreme Court of India (“Supreme Court”), as well as High Courts which have adopted a hands-off approach in arbitration proceedings and arbitration awards.
Another shift that has been seen in India’s approach towards arbitration is its express legislative acceptance of institutional arbitrations. For example, one of the amendments made to the Arbitration Act in 2019 was to amend Section 11 of the Arbitration Act, inter alia identifying the right of arbitral institutions to appoint arbitrators.
In addition to an increasing use of internationally present arbitral institutions, India has also seen an influx of several international arbitral institutions formed in India, focused on acting as a bridge for Indian parties to make the desired shift to institutional arbitration.
1. Abhisar Vidyarthi, A Late Opening to the Notion of International Public Policy?, Arbitration International, (2022); aiac015, https://doi.org/10.1093/arbint/aiac015
Section 7(1) of the Arbitration Act provides that an arbitration agreement is “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not”.2
Briefly put, the essential features of an arbitration agreement under the Arbitration Act may be summarised as below:
- the arbitration agreement should clearly reflect a determination and obligation of the parties to go to arbitration and not merely contemplate the possibility of going for arbitration;3
- the arbitration agreement should be in writing.4 There is no specific form requirement for an arbitration agreement,5 and it can be contained in a document signed by the parties, an exchange of letters, or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other;6
- the arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement, and that substantive rights of parties will be determined by the agreed tribunal;7
- the arbitration agreement must contemplate that the arbitral tribunal ought to be competent to adjudicate the disputes impartially after providing due opportunity to the parties to present their respective cases;8 and
- the arbitration agreement must provide for reference of arbitrable disputes to arbitration. Disputes where the cause of action and subject matter are related to actions in rem, such as criminal cases, winding-up cases, matrimonial disputes, and matters wherein arbitration is governed by special statutes are not arbitrable in India.9
It is pertinent to highlight that Indian law recognises the universally accepted principle of severability of arbitration agreements. It provides that the arbitration agreement is a separate and distinct agreement from the underlying contract.10
With respect to the construction of an arbitration agreement, the Supreme Court affirmed that the mere use of the words ‘arbitration’ or ‘arbitrator’ in a clause will not make it an arbitration agreement, if it requires fresh or further consent of the parties for reference to arbitration.11 An agreement to agree is not enforceable under Indian law.
Recently, the Supreme Court has identified another important question that may impact arbitration agreements and enforcement thereof in future times, specifically where parties attempt to bind non-signatories to arbitration agreements in India. In its decision in Cox & Kings v SAP India (“Cox & Kings Judgment”),12 the two-judge bench of the Supreme Court has opined on the correctness and validity of the ‘group of companies doctrine’ as a tool to bind non-signatories to arbitration agreements in India. In the Cox & Kings Judgment, the Supreme Court has noted that the application of the ‘group of companies doctrine’ may be founded more on economic convenience than a legal doctrine, and may also be in conflict with settled principles such as party autonomy and distinct identity of companies. In doing so, the Supreme Court has referred several questions in relation to the scope and legality of the doctrine to a larger bench for consideration. Until a larger bench decides the issues left open by the Cox and Kings Judgment, the ‘group of companies doctrine’ remains a valid legal basis in India to bind non-signatories to arbitration agreements.
Until the Cox & Kings Judgment, the ‘group of companies doctrine’ had been consistently upheld by the Supreme Court to refer non-signatories to arbitration, when the circumstances demonstrate that the mutual intention of all the parties was to bind both signatories as well as non-signatory affiliates. The current test discerning such mutual intent to arbitrate is to examine (i) the relationship of the non-signatory to the signatory party, (ii) the commonality of the subject matter, (iii) the composite nature of the transaction, and (iv) the performance of the contract.13
The Arbitration Act, being a complete code, provides for the procedure from the inception of the arbitration to the enforcement of the award that is rendered in such arbitration.
Notice of arbitration
Under the Arbitration Act, the arbitration is commenced when the request for the dispute to be referred to arbitration is received by the respondent.14 The objective of this request/notice is three-fold. First, it is identified as the first step towards the initiation of the arbitral process. Second, it ensures consensus on several aspects, viz.: the scope of the disputes, the determination of which disputes remain unresolved, and the determination of which disputes are time-barred; and identification of the claims and counter-claims. Third, it facilitates the choice and appointment of arbitrator(s) as per the agreed procedure, if any.15
Party autonomy in deciding the arbitral procedure
The Arbitration Act upholds the principle of party autonomy, particularly with respect to the arbitration procedure as the grundnorm of arbitration.16 Accordingly, parties in India are free to decide the procedure in arbitration proceedings, subject to certain mandatory provisions of the Arbitration Act. Parties are also free to agree to any institutional rules to govern the conduct of their arbitration proceedings. In the absence of an agreement, Section 19 of the Arbitration Act provides discretion to arbitral tribunals to conduct the arbitration proceedings in a manner they deem appropriate. In such circumstances, while arbitral tribunals may draw sustenance from the civil procedure laws followed by civil courts in India, they are not bound by it.17
Parties’ autonomy in deciding the seat and venue of arbitration
The proper law governing the arbitration agreement (lex arbitri) is determined by the ‘seat’ of arbitration. In other words, the ‘seat’ of arbitration determines the court that will exercise supervisory jurisdiction over the arbitration. The procedural law of arbitration (curial law) is determined through party agreement, discretion of the arbitrator, and the institutional rules chosen by the parties, if any.18 The Supreme Court has observed that parties, despite being Indian nationals, can designate a seat of arbitration outside India.19 On the other hand, ‘venue’ of arbitration determines the geographical place where the arbitration is to be conducted.
Section 20 of the Arbitration Act provides parties the freedom to decide the seat of arbitration as well as the venue of the arbitration hearings.
Evidence in arbitration
The arbitral tribunals also retain discretionary powers with respect to determining the admissibility, relevance, materiality, and weight of any evidence.20 The arbitral tribunal may rely upon the ‘IBA Guidelines on Taking Evidence’ while dealing with questions pertaining to document production, privilege, and admissibility of evidence. Arbitral tribunals, or the parties with the approval of the arbitral tribunal, may also make an application to the court for assistance in taking evidence, such as ordering a party to produce a document or permit inspection of a property.21 Section 26 of the Arbitration Act empowers arbitral tribunal to appoint expert witnesses to report to it on specific issues to be determined in the arbitration proceedings.
Limited judicial intervention
Section 5 of the Arbitration Act recognises the autonomous nature of arbitration proceedings and restricts any judicial intervention which is not in accordance with the Arbitration Act. The Arbitration Act therefore furthers the principle of ‘unbreakability’ in arbitral procedure.22 Interim orders or case management decisions passed in arbitration proceedings are not amenable to challenge unless they fall under the exhaustive list of appealable orders provided under Section 37 of the Arbitration Act. Recently, the Hon’ble Delhi High Court has observed that an arbitrator is the final arbiter on facts as well as law.23
Confidentiality of the arbitration proceedings
A key attribute of arbitration proceedings is confidentiality of the process. This is an important reason why parties prefer arbitrations, which are ‘closed-door’ in nature as against an open court process where it is difficult to maintain confidentiality of both the existence of the dispute and the information that may be shared during the proceedings. While arbitrations are always supposed to be confidential in nature, the Arbitration Act, when being amended in 2019, expressly provided for confidentiality of the arbitration proceedings. Section 42A, which was introduced in 2019 to the Arbitration Act, provides that “[n]otwithstanding anything contained by any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purpose of implementation and enforcement of award”. The only exception to the rule of confidentiality, as recognised in Section 42A, is when a party is seeking enforcement of an award passed in the arbitration proceedings. The said provision is extremely broad on its applicability of principles of confidentiality and as is clear from its plain reading, leaves a very narrow carve out. It is important to see judicial interpretation of the said provision in the times to come.
Arbitration time-bound process
The Arbitration Act also furthers expediency in completion of arbitration proceedings and provides strict timelines for conduct of arbitration and rendering of the award. For domestic arbitrations, Section 29A of the Arbitration Act provides that the arbitral tribunal shall deliver the award within a period of 12 months from completion of pleadings. While there is no strict timeline for international commercial arbitrations, arbitral tribunals are expected to dispose of the matter as expeditiously as possible.
- Section 7(1), Arbitration Act.
- Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719, ¶ 8.
- Govind Rubber v. Louis Dreyfus, (2015) 13 SCC 477, ¶¶ 15, 16, 21, 23.
- Babanrao Rajaram Pund v. Samarth Builders & Developers, (2022) 9 SCC 691, ¶ 15.
- Section 7(4), Arbitration Act.
- K.K. Modi v. K.N. Modi, (1998) 3 SCC 573, ¶¶ 17–18.
- Vidya Drolia v. Durga Trading, (2021) 2 SCC 1.
- Section 7, Arbitration Act; Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1, ¶ 83; Reva Electric Car Co. (P) Ltd. v. Green Mobil, (2012) 2 SCC 93, ¶ 54; Today Homes & Infrastructure v. Ludhiana Improvement Trust, (2014) 5 SCC 68, ¶ 14; SMS Tea Estates v. Chandmari Tea, (2011) 14 SCC 66, ¶¶ 12–14; Ayyasamy v. Paramasivam, (2016) 10 SCC 386, ¶¶ 47–54.
- Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture, (2022) SCC Online 960, ¶ 9.
- Cox & Kings Ltd. v. SAP India (P) Ltd., (2022) SCC Online SC 570.
- Chloro Controls v. Severn Trent, (2013) 1 SCC 641; Ameet Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678; Ayyasamy v. Paramasivam, (2016) 10 SCC 386; Cheran Properties v. Kasturi and Sons, (2018) 16 SCC 413; MTNL v. Canara Bank, (2020) 12 SCC 767; ONGC Ltd. v. Discovery Enterprises, (2022) SCC Online SC 522.
- Section 21, Arbitration Act.
- Alupro Building Systems Pvt Ltd v. Ozone Overseas, (2017) SCC Online Del 7228, ¶ 30.
- BALCO v. Kaiser Aluminium Technical Services, (2016) 4 SCC 126, ¶¶ 5, 10.
- Maharashtra State Electricity Board v. Datar Switchgear, (2003) BomLR 937.
- Abhisar Vidyarthi, Two Indian Parties Can Choose a Foreign Seat: Party Autonomy Prevails in India, Transnational Dispute Management (June 2021).
- PASL Wind Solutions (P) Ltd. v. GE Power Conversion (India) (P) Ltd., (2021) 7 SCC 1.
- Section 19(4), Arbitration Act.
- Section 27, Arbitration Act.
- Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75.
- M/s. Movie Times Cineplex Pvt. Ltd. v. M/s. MRG Developers Pvt. Ltd. & Ors., FAO (OS) (Comm) 164 of 2017, Delhi High Court.
The Arbitration Act accords foremost respect to party autonomy when dealing with appointment of arbitrators. Parties are free to mutually decide the procedure for appointment of arbitrators, provided that the number of arbitrators appointed should be odd in number.24 A person of any nationality may be appointed as an arbitrator, unless otherwise agreed by the parties. In the event, the parties fail to reach an understanding on the procedure for appointment in an arbitration with three arbitrators, the default procedure provided under the Arbitration Act is that each party appoints one nominee arbitrator and the two nominated arbitrators appoint a third presiding arbitrator. In the event, the parties fail to appoint the arbitrators, the arbitrators are appointed by the High Court or institution designated by the High Court (in case of international commercial arbitration by the Supreme Court; or the institution designated by the Supreme Court).
Independence and impartiality of arbitrators are the foremost requirements for fair and just resolution of disputes. The Arbitration Act lays down a code to determine the eligibility, independence, and impartiality of arbitrators under the Fifth and Seventh Schedules. The enumeration of grounds given in the Fifth and Seventh Schedules have been taken from the IBA Guidelines, particularly from the Red and Orange Lists thereof.
Section 12 provides for disclosure requirements by arbitrators, which are aimed at ensuring independence and impartiality by the arbitrators. The grounds and mechanism for challenge of an arbitrator on the grounds of lack of independence, impartiality, or qualification as agreed to by parties are set out in Section 12 and Section 13 of the Arbitration Act respectively. The Fifth Schedule of the Arbitration Act sets out grounds which give rise to justifiable doubts as to the independence or impartiality of arbitrators, inter alia the arbitrator’s relationship with the parties or counsel, the relationship of the arbitrator to the dispute, the arbitrator’s direct or indirect interest in the dispute etc.
Post the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”), Section 12(5) has been added to the Arbitration Act, which provides that “notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator”. Additionally, Indian courts have also held unilateral appointment of arbitrators to not be valid in India.25 The developments are also aimed at ensuring the independence and impartiality of the arbitrators. Section 13 sets out that a party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in Section 12(3), send a written statement stating the reasons for the challenge to the arbitral tribunal.
Indian law also recognises the settled principle of kompetenz-kompetenz, wherein the arbitral tribunal is empowered to rule upon its own jurisdiction.26 An appeal can be made to a court from such an order of the arbitral tribunal.27
Recently, on the issue of fixation of fees of the arbitrators, the Supreme Court observed that the fees payable to the arbitrators in ad-hoc arbitrations is decided through an agreement between the parties and the arbitrator given that party autonomy is crucial to arbitration proceedings.28 In the event the parties cannot agree upon the arbitrators’ fees, the arbitrators can decide upon the fees in terms of Schedule IV of the Arbitration Act, which shall be binding upon the parties. The Supreme Court further observed that when arbitration is conducted under the auspices of an arbitral institution, the fees payable to the arbitrator are fixed by the institution itself, or at times, negotiated upon between the parties and the arbitrator.
- Section 10 read with Section 11, Arbitration Act.
- TRF Limited v. Energo Engineering Projects Ltd., (2017) 8 SCC 377; Perkins Eastman Architects DPC & Anr. v. HSCC, (2019) SCC Online SC 1517; Bharat Broadband Network Ltd. v. United Telecoms Ltd, (2019) 5 SCC 755.; Proddatur Cable TV Digi Services v. Siti Cable Network Ltd., (2020) SCC Online Del 350.
- Section 16, Arbitration Act; Ayyasamy v. Paramasivam, (2016) 10 SCC 386, ¶¶ 12.2-13.
- Section 37(2)(a), Arbitration Act.
- Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV, (2022) SCC Online SC 1122.
Interim relief by courts
Section 9 of the Arbitration Act recognises the power of Indian courts to grant interim relief to parties in aid of arbitration, either before the commencement of the arbitration, during the arbitral process, or even after the pronouncement of the award (prior to enforcement thereof).
An application under Section 9 lies before a ‘court’ as defined under Section 2(1)(e) of the Arbitration Act, i.e. the High Court having territorial jurisdiction to grant the relief in this case. The object of Section 9 of the Arbitration Act is to ensure protection of the property that is the subject matter of arbitration or to ensure that the arbitration proceedings do not become infructuous and the final award does not become a paper award, of no real value.29 The proviso to Section 2(2) of the Arbitration Act extends the application of Section 9 to foreign-seated arbitrations subject to an agreement to the contrary.30 Therefore, where, in an arbitration seated outside India, assets of one of the parties are situated in India and interim orders are required with respect to such assets, including preservation thereof, a court may pass such orders under Section 9 of the Arbitration Act.31
The court, while examining whether interim relief may be granted in favour of a party under Section 9 of the Arbitration Act, considers the three-prong test, namely existence of a prima facie case, balance of convenience in favour of the applicant, and irreparable loss to have arisen in the absence of interim relief.32
Section 9(3) is a notable provision which was inserted to the 2015 Amendment; and provides that when a party moves the court seeking interim measures of protection under Section 9 subsequent to the constitution of the arbitral tribunal, it is required to satisfy the court that the nature of the relief being sought by it is such that cannot be granted by the arbitral tribunal or that circumstances exist that may render the remedy of seeking interim measures from the arbitral tribunal inefficacious.33 Section 9(3), therefore, accords primacy to the relief which is available to parties before the arbitral tribunal. This is yet another move by the Indian Legislature to reduce court interference in arbitrations and to ensure that the parties reach out to arbitral tribunals, even at the interim stage.
Interim relief by tribunals
Section 17(1) of the Arbitration Act delineates the power of an Indian-seated arbitral tribunal to grant interim relief to the parties. Section 17(1) was also amended by the 2015 Amendment to bring it at par with Section 9 and now an arbitral tribunal is fully clothed with the same powers as a court to grant interim relief in India.34 Section 17(2) of the Arbitration Act, which was also inserted by the 2015 Amendment, sets out the manner in which the interim measures granted under Section 17(1) will be enforced.35
In Amazon.com Nv Investment Holdings LLC v FRL (“Amazon Case”),36 the Supreme Court addressed the issue of enforceability of orders passed by an emergency arbitrator and held that awards or orders passed by an Indian-seated emergency arbitrator are akin to awards or orders passed by an Indian-seated arbitral tribunal under Section 17(1) of the Arbitration Act and would be enforceable as an order of the court under Section 17(2) of the Arbitration Act.37 This has been a globally recognised landmark judgment from India in terms of both the relevance and recognition of emergency arbitration and awards in India.
The application is, however, restricted to Indian-seated arbitrations since it is included in Part I of the Arbitration Act.38 The decision of the Supreme Court in the Amazon Case does not deal with the issue of enforceability of foreign-seated emergency awards. The Arbitration Act does not contain a provision similar to Section 17(2) in Part II of the Arbitration Act, which applies to foreign-seated arbitrations. Further, the Arbitration Act, though based on the Model Law, does not contain any provision which is pari materia to Article 17H of the Model Law, enabling enforcement of interim measures issued by a foreign-seated arbitral tribunal.39 The position under Indian law in this respect is summarised in a judgment of the Delhi High Court,40 the operative portion of which is reproduced below:
“105. However, in my view, a party seeking interim measures cannot be precluded from doing so only for the reason that it had obtained a similar order from an arbitral tribunal. Needless to state that the question whether the interim orders should be granted under Section 9 of the Act or not would have to be considered by the Courts independent of the orders passed by the arbitral tribunal. Recourse to Section 9 of the Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that does not mean that the Court cannot independently apply its mind and grant interim relief in cases where it is warranted.…”
As indicated, the above judgment is of the Delhi High Court, and other High Courts in the country may take a contrary view until such time the Supreme Court opines on this aspect and settles the law on the same.
An order passed under Section 9 and Section 17 is appealable under Section 37 of the Arbitration Act. No second appeal is permitted except to the Supreme Court under the provisions of the Constitution of India.
- Arcelormittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712, ¶ 88.
- Section 2(2) of the Arbitration Act is reproduced below:
“This Part shall apply where the place of arbitration is in India:
[Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act]”.
- PASL Wind Solutions (P) Ltd. v. GE Power Conversion (India) (P) Ltd., (2021) 7 SCC 1, ¶ 38.
- Arcelor Mittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712, ¶ 88.
- Amazon.com NV Investment Holdings LLC v. Future Retail Limited, (2022) 1 SCC 209.
- Section 17(2) of the Arbitration Act reads as follows:
“Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court”.
- Amazon.com NV Investment Holdings LLC v. Future Retail Limited, (2022) 1 SCC 209.
- Section 2(2), Arbitration Act.
- 246th Report of the Law Commission of India at p. 27; Gary Born, International Commercial Arbitration, Third Edition, Vol. II at pp. 2704–2706.
- Raffles Design v Educomp, (2016) SCC Online Del 5521 at ¶¶ 101–106.
An arbitral award is a clear and unambiguous manifestation of the decision taken by the arbitrator on the dispute between the parties. Section 31 of the Arbitration Act provides for the form and contents of an arbitral award. The Arbitration Act recognises a decision as an award if it is, inter alia, in writing, signed, and well-reasoned. Once the arbitral tribunal passes a final award and adjudicates upon the dispute, the tribunal becomes functus officio. The Supreme Court has upheld the following features in an arbitral award:
- it concludes the dispute as to the specific issue determined in the award so that it has res judicata effect between the parties; if it is a final award, it terminates the tribunal’s jurisdiction;
- it disposes of parties’ respective claims;
- it may be confirmed by recognition and enforcement; and
- it may be challenged in the courts of the place of arbitration.41
Section 31(7) recognises the power of an arbitral tribunal to grant interest in its awards. The power of the arbitral tribunal to award interest is discretionary and is subject to agreement between the parties.42 The arbitral tribunal has power to award interest on the whole amount or any part thereof and also on any part of the period between the date on which the cause of action arose and the date on which the award is made. The arbitral tribunal ought to give reasons for fixing the interest rate.43
Section 31(8) also gives the arbitral tribunal the power to fix the costs of an arbitration in accordance with Section 31 A.44 Section 31A sets out the regime for deciding costs of an arbitration proceeding. The arbitral tribunal has the discretion to determine whether costs are payable by one party to the other, the amount of such costs, and when such costs are to be paid. It also provides that the general rule for cost apportionment is that the unsuccessful party will be ordered to pay the costs of the successful party. It also lists down circumstances, inter alia conduct of parties, partial or full success of the party etc., which may be considered by the tribunal while determining costs.
Section 33 provides that the tribunal shall correct any computation errors, or give an interpretation of a specific point or part of the award, if so requested by the parties within 30 days from the receipt of the arbitral award.45 The tribunal may also, on its own, correct any computation error within 30 days from the date of the award.46 The tribunal also has the power to make an additional award as to claims presented in the arbitral proceedings but omitted from the award, upon request by a party.47
Section 44 is a seat-oriented provision and applies to awards rendered in arbitrations seated outside India.48 For an award to be recognised as a ‘foreign award’ under the Arbitration Act, the following conditions must stand satisfied:
- the dispute decided by the arbitral tribunal must be a ‘commercial dispute’ under Indian law;
- such dispute must have arisen between ‘persons’ (without regard to their nationality, residence, or domicile);
- the award must have been made in pursuance of a written arbitration agreement; and
- the arbitration must have been conducted in a nation which is a party to the New York Convention.
Section 35 (for Indian-seated arbitration) and Section 46 (for foreign-seated arbitration) of the Arbitration Act provides that an arbitral award shall be final and binding on the parties. An arbitral award is considered to be final if it conclusively and wholly determines all the issues in the arbitration.
Challenge of the arbitration award
The parties can make an application for setting aside the arbitral award within three months of receipt of the arbitral award on the grounds set out in Section 34 (in Indian-seated arbitrations) and Section 48 (in foreign-seated arbitrations) of the Arbitration Act.
Traditionally, India had been known to have an anti-arbitration image which was inconsistent with international standards. However, in recent times, Indian courts have increasingly adopted a pro-arbitration and hands-off approach to arbitral awards.
In the past, the Supreme Court recognised that an arbitral award cannot be challenged on the ground of public policy merely on a violation of Indian law.49 The enforcement of a foreign award can be refused on the ground of public policy only if the award is against (a) fundamental policy of Indian law, (b) interests of India, or (c) justice or morality.50
Subsequently, the Supreme Court expanded the scope of ‘public policy’ to include challenge to a domestic award that breaches Indian law or conditions of the contract, i.e. if the award is patently illegal.
The Supreme Court held that patent illegality is made out if the award shocks the conscience of the court.51 It further clarified an arbitral award is patently illegal if the arbitrator failed to act in terms of the contract or ignored specific terms of the contract. 52
A good example of the shift in the trend by the Supreme Court can be seen from its more recent decisions wherein the Supreme Court revised its position on the application of patent illegality as ground to challenge foreign awards.53 The Supreme Court revised its initial view and narrowed the scope of challenge to foreign awards holding that the ground of patent illegality would be limited to domestic awards only.54
Subsequently, the 2015 Amendment expressly sets out the standards for an award to be challenged on the ground of public policy as: (a) the award is vitiated by fraud or corruption; (b) it is in contravention to the fundamental policy of Indian law; and (c) it is in conflict with the basic notions of morality and justice. Since the 2015 Amendment, the Supreme Court has time and again limited the scope of a challenge on the ground of public policy to prevent undue interference with domestic and foreign awards.55 Indian courts have also recently affirmed that under the limited scope of Section 34 of the Arbitration Act, courts are not empowered to modify arbitral awards, including by awarding interest.56
Enforcement of the arbitration award
Section 36 of the Arbitration Act provides that an award shall be enforced in terms of the Code of Civil Procedure, 1908 (“CPC”) in the same manner as if it were a decree of court. Order XXI of the CPC sets out the manner in which a decree may be executed by the decree-holder against the judgment-debtor. In order to execute a decree, the decree-holder shall make an application to the court giving particulars as required under Order XXI of the CPC. The award shall be enforced as a decree on expiry of three months from the receipt of the arbitral award. The cooling off period of three months is provided so that the parties have sufficient time to challenge the award on the grounds available under Section 34, if they so desire.
The filing of an application to set aside the arbitral award under Section 34 does not render the award unenforceable unless the court grants an order of stay on the operation of the arbitral award. Section 36 also provides that the court may, while considering an application for grant of stay in case of an arbitral award for payment of money, ‘have due regard’ to the provisions for grant of stay of a money decree under the provisions of the CPC. The Supreme Court clarified that the phrase ‘have due regard’ would imply that the provisions of the CPC are merely to be considered and are not mandatory.57
It is noteworthy that the position on the stay on the operation of an arbitral award has undergone changes with amendments to the Arbitration Act. The Arbitration Act initially provided that filing of an application to set aside the arbitral award puts an automatic stay on the enforcement of the award. Thereafter, the 2015 Amendment made it discretionary for the court to grant a stay on the enforcement of the arbitral award. Subsequently, the Arbitration and Conciliation (Amendment) Act, 2021, provided for an unconditional stay on the award in case a prima facie case is made out wherein (a) the arbitration agreement which is the basis of the award, or (b) making of the award is induced or affected by fraud or corruption.
Section 47 of the Arbitration Act adopts the standard under Article IV of the New York Convention for enforcement of foreign awards in India. After the court is satisfied that a foreign award is enforceable under Part II of the Arbitration Act, the award will be deemed to be a decree of that court under Section 49 of the Arbitration Act and enforced in the same manner as suit decrees are enforced.58
A petition seeking enforcement of a foreign award must be filed within three years from the date on which the right to apply accrues to the successful party.59 Such a petition will be filed before the relevant High Court that exercises territorial jurisdiction over the place where the assets are located. Under Section 47 of the Arbitration Act, the party applying for enforcement of a foreign award must, along with such enforcement application, produce:
- the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made; and
- the original arbitration agreement or a duly certified copy thereof.60
- Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., (2017) 2 SCC 228.
- Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation, (2022) 9 SCC 286.
- 43. Executive Engineer (R and B) v. Gokul Chandra Kanungo, AIR (2022) SC 4857.
- Section 31(8), Arbitration Act; Section 31A, Arbitration Act.
- Section 33(1), Arbitration Act.
- Section 33(3), Arbitration Act.
- Section 33(4), Arbitration Act.
- PASL Wind Solutions (P) Ltd. v. GE Power Conversion (India) (P) Ltd, (2021) 7 SCC 1, ¶¶ 45 and 50.
- Renusagar Power Co. Limited v. General Electric Company, (1994) Supp (1) SCC 644.
- McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181; Associate Builders v. DDA, (2015) 3 SCC 49.
- Indian Oil Corporation Ltd. v. Shree Ganesh Petroleum Rajgurunagar, (2022) 4 SCC 463.
- Phulchand Exports Ltd. v. O.O. O. Patriot, (2011) 10 SCC 300.
- Shri Lal Mahal Ltd. v. Progetto Grano Spa, (2014) 2 SCC 433.
- Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131; Vijay Karia v. Prysmian Cavi E. Sistemi SRL, (2020) 11 SCC 1.
- NHAI v. Hakeem, (2021) 9 SCC 1; Canara Bank v. State Trading Corporation of India, (2022) SCC Online Del 3060.
- Pam Developments Pvt. Ltd. v. State of West Bengal, (2019) 8 SCC 112.
- Section 49 of the Arbitration Act of the Arbitration Act is reproduced below:
“49. Enforcement of foreign awards.—Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court”.
- Government of India v. Vedanta Limited, (2020) 10 SCC 1 at ¶ 65.
- Gemini Bay Transcription (P) Ltd. v. Integrated Sales Service Ltd., (2022) 1 SCC 753, ¶¶ 35–36.
India has shown a general lack of trust in investment arbitration and has adopted a restrictive approach to entering investment treaties. Notably, in the last decade, India was subjected to several investment treaty claims as well as adverse investment awards arising out of regulatory changes undertaken in India. Post 2015, India unilaterally terminated most of its existing bilateral investment treaty agreements and adopted a new Model BIT in 2015 to negotiate fresh investment treaties in the future.
The 2015 Model BIT made several changes to India’s prior approach to the investment-state dispute-settlement mechanism, and in particular adopted an exhaustion of the local remedies clause which requires the investor to exhaust all judicial and administrative remedies relating to the measure underlying claim for at least a period of five years prior to initiation of arbitration.61 In addition, the 2015 Model BIT also included reservations in substantive rights granted to the investors, including the right to fair and equitable treatment. Given that India is not a signatory to the ICSID Convention, there is no direct enforcement mechanism for investment awards in India.62 In view of India’s commercial reservation under the New York Convention, it is unlikely that Indian courts would consider investment awards as being commercial in nature and as a consequence the Arbitration Act (which implements the Convention) may not apply to investor-state dispute settlement.63
Based on the 2015 Model BIT, India has, however, successfully negotiated several new bilateral investment treaties with Bangladesh, Belarus, Columbia, Taipei, the Kyrgyz Republic, and Brazil. India presently has seven investment arbitrations pending against it, pursuant to different investment treaties.64
- Article 15, Model BIT.
- Abhisar Vidyarthi, Revisiting India’s Position to Not Join the ICSID Convention, Kluwer Arbitration Blog, https://arbitrationblog.kluwerarbitration.com/2020/08/02/revisiting-indias-position-to-not-join-the-icsid-convention/.
- R.M. Investments & Trading Co. v. Boeing Co, (1994) SCC (4) 541; (1983) 1 GLR 292.
- Investment Dispute Settlement Navigator (India), https://investmentpolicy.unctad.org/investment-dispute-settlement/country/96/india/investor.
As India emerges as a global economic superpower, considerable time and effort has been invested in providing a reliable and predictable legal framework to facilitate enforcement of contracts, and promote a more user-friendly, cost-effective, and expeditious mechanism for arbitration. Over the last decade, both the legislature and the judiciary have adopted a pro-arbitration approach. The efforts being made in India are to ensure that the traditional approach in India is streamlined and India emerges as an arbitration-friendly jurisdiction. An effective arbitration regime will also assist the ‘Ease of Doing Business in India’ agenda of the present government. For instance, the decision in the Amazon Case was a first-of-its-kind judgment by the Supreme Court of any jurisdiction, wherein the legality and enforceability of emergency arbitration awards was upheld in India. Similarly, several judgments such as PASL Wind Solutions (P) Ltd. v. GE Power Conversion (India) (P) Ltd.65 are significant indications of the Supreme Court’s unwavering commitment to uphold party autonomy as the guiding principle of arbitration in India. This is a testament to the fact that India is not only ready to align with the best international arbitration practices, but is also ready to act as a lodestar for other jurisdictions by adopting arbitral innovation which enhances the benefits and efficiency in resolution of disputes.
- PASL Wind Solutions (P) Ltd. v. GE Power Conversion (India) (P) Ltd., (2021) 7 SCC 1.