In this edition of our Briefcase, we unravel arbitration happenings from February 2025, bringing you key insights and developments. Stay informed, stay ahead – Happy reading!
Rendezvous – Indian Courts and Arbitration
Supreme Court
Supreme Court reserves verdict on courts’ power to modify arbitral awards – Gayatri Balasamy v. M/s ISG Novasoft Technologies [SLP (C) Nos.15336-15337/2021]
On 19.02.2025, a five-judge constitutional bench of Supreme Court, after three detailed hearings reserved its judgement on a key question surrounding powers of courts to modify arbitral awards under Section 34 & 37 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The need for a larger bench reference arose on account of two different line of thoughts emanating from coordinate benches of Supreme Court and some high courts. The Supreme Court in Project Director NHAI vs. M. Hakeem line of judgments has restrained itself from modifying the awards whereas in J.C. Budhraja vs. Chairman, Orissa Mining Corporation Ltd. 2008 2 SCC 444, line of judgments, the Court has either modified / accepted modified versions of awards.
During the final leg of arguments, the Hon’ble Chief Justice quired that when a court partially sets aside an award, in a way it is modifying the award, which is done in exercise of the Court’s wider powers beyond Section 34. Arguing against modification, several senior advocates laid stressed on the impact this may have on future of international arbitration in India as corporates maybe hesitant to arbitrate in India, knowing that the award is unenforceable as is and susceptible to modifications by courts. It remains to be seen whether the Supreme Court would finally read in the missing word ‘modification’ in power of courts to set-aside awards.
Note: Vide judgment dated 30.04.2025, the Hon’ble Supreme Court has decided the reference and held that courts have limited powers to modify an arbitral award, including in respect of post-award interest. A detailed analysis of the judgment will follow in our subsequent briefcase.
High Court of Delhi
Section 12(5) waiver comes to the aide of court. Award safe, despite unilateral appointment of arbitrator – Bhadra International India v. Airports Authority of India [2025 SCC OnLine Del 698]
Moving away from the now settled position of law, a division bench of High Court of Delhi upheld an award passed by a unilaterally appointed arbitrator, citing the written waiver given by the parties under Section 12(5) of the Arbitration Act. The judgment shows that bench was cognizant of the now settled law that awards passed by unilaterally appointed arbitrators are ex-facie illegal and liable to be set aside, even if no objection is taken by the parties at any stage. However, the distinguishing fact noted by the bench was the express statement of the parties recorded in a procedural order of the Ld. Arbitrator, giving no objection to the appointment. The bench noted that this constituted compliance of proviso to Section 12(5) of the Arbitration Act and express waiver of its application. This judgment ought not to be seen as a change in the existing position of law regarding legality of awards passed by unilaterally appointed arbitrators, but only a ruling on singularly distinguished facts.
Award set-aside due to lack of signature by all arbitrators – M/s Isc Projects v. Steel Authority of India [2025 SCC OnLine Del 1133]
The High Court of Delhi set aside an award, on the grounds that it was not signed by all the arbitrators. The bench emphasized that an arbitral award must bear the signatures of all tribunal members, as this is a substantive requirement rather than a mere ministerial act ensuring each member’s participation in the decision-making process. If any member’s signature is missing, the award must explicitly state the reason for such omission. Failure to provide these reasons can render the award vulnerable to being set aside. In the case at hand, the tribunal’s award lacked the signature of one arbitrator, and no explanation was provided for this omission. Interestingly, the judgment does not discuss any illegality on the merits of the award.
In the opinion of editor, this may have been an apt case for Court to exercise its jurisdiction under Section 34(4) of the Arbitration Act and remand the award to the arbitrators for removal of such an illegality, rather than simply setting it aside and asking the parties to undergo another round of arbitration!
Reiterated! MSMED Act overrides Arbitration Act in disputes involving MSMEs – Idemia Syscom India v. M/s Conjoinix Total Solutions [2025 SCC OnLine Del 1023]
The High Court of Delhi recently rejected a Section 11 application for appointment of arbitrator. The court reiterated that the Micro, Small, and Medium Enterprises Development Act, 2006 (“MSMED Act”) being a special law prevails over the Arbitration Act. Relying on Silpi Industries (2021 SCC OnLine SC 439) and Gujrat State Civil Supplies Corp. (2023) 6 SCC 40, the Court held that the non-obstante clauses in Sections 18 and 24 of the MSMED Act overrides other laws, including independent arbitration agreements. The court noted that during the pendency of the Section 11 application, the Respondent had approached the MSMED Facilitation Council under Section 18 of the MSMED Act. As per the scheme of the MSMED Act, it is only upon failure of such conciliation proceedings, arbitration proceedings are initiated, either by itself or by reference to any institution. Accordingly, the petition was dismissed.
Delhi High Court overturns arbitral award, cites public policy in RIL’s unauthorized gas extraction – Union of India v. Reliance Industries & Ors. [FAO (OS) (Comm.) No. 201 of 2023]
The Delhi High Court, in a recent Section 37 appeal, set aside the arbitral award concerning Reliance Industries Limited (RIL), holding that the tribunal erred in validating RIL’s extraction of migrated gas without explicit government authorization. The award was found to be against the public policy of India and patently illegal. The dispute arose under a 2000 Production Sharing Contract (PSC) between the Union of India (UOI), RIL, and Niko Limited for hydrocarbon extraction at the Krishna-Godavari Basin, where RIL was engaged solely for its technical expertise. Central to the dispute was whether RIL had been unjustly enriched by extracting and selling migrated gas from adjoining blocks without authority. The Division Bench, while mindful of the limited scope of Section 37, held that both the tribunal and Section 34 court overlooked critical aspects of public policy and the Public Trust Doctrine. It found that RIL lacked any explicit or implied permission to explore the migrated gas, rejected the tribunal’s finding that government inaction implied consent, and invoked Article 297 of the Constitution concerning ownership of natural resources. Additionally, RIL’s non-disclosure of the 2003 D&M report was deemed a material breach impacting regulatory oversight. Accordingly, UOI’s appeal was allowed, and the award was set aside. Whether the Section 37 court’s detailed factual analysis would amount to a re-appreciation of evidence is open to interpretation.
Reiterated! Section 34 filed without an arbitral award is “non-est” – Pragati Construction Consultants v. Union of India [2025 SCC OnLine Del 636]
A three-judge bench of the High Court of Delhi reiterates the already settled position of law, that non filing of an arbitral award would make the said objections liable to be treated and declared as non – est.
Gujarat High Court
Belated fresh plea on non-delivery of award copy cannot be entertained under Section 37 – National Highways Authority of India v. Kishorbhari Valjibhai Jethani & Ors. [2025 SCC Online Guj 714]
In a recent ruling, the Gujarat High Court held that a party cannot argue, at a belated stage in a Section 37 appeal under the Arbitration Act, that the limitation period under Section 34 did not commence due to non-receipt of a signed award. In this case, the National Highways Authority of India (“NHAI”) sought to justify a 200 – 230 days delay in filing its Section 34 application by claiming that it never received the signed award. The Court reaffirmed that the limitation period under Section 34(3) of the Arbitration Act begins only upon receipt of the signed award. However, the Court held that NHAI failed to raise this plea before the civil court, where it should have asserted the non-receipt of the award under Section 34 of the Arbitration Act. Dismissing the appeals, the Court emphasized that procedural objections must be raised at the earliest opportunity and cannot be used retrospectively to circumvent delay.
High Court of Jammu & Kashmir and Ladakh
Award can be partially set-side so far as the findings are independent and severable from the rest of the award – Zaffar Abbas Din v. Nasir Hamid Khan [2025 SCC OnLine J&K 125]
Partially setting aside an award, the court upheld all the monetary reliefs granted by the tribunal to the respondent, but severed and set aside certain independent declaratory findings. In this instance, the petitioner had approached the tribunal with claims arising out an unilateral termination of a contract for space to operate a store. The court and tribunal both agreed that the contract was wrongly terminated by petitioner who had provided the space and respondent was entitled to its claims for loss on stocks, damages, loss of profits etc. However, the court disagreed with the finding in the award that the contract would be renewed after every 5 years in perpetuity. In court’s view, the contract was determinable in nature. The court set aside this finding while upholding the rest of the award as the findings were independent of each other.
Allahabad High Court
Reiterated! Amended Section 36 applies prospectively – U.P. Jal Nigam (Urban) and Anr v. Spml Infra Ltd. [2025:AHC:20224]
The Allahabad High Court relying on Board of Control for Cricket in India [(2018) 6 SCC 287] held that the amended Section 36 of the Arbitration Act applies prospectively to the proceedings initiated on or after the date of commencement of the 2015 amended arbitration Act.
Global Highlights
The Arbitration Act 2025 received Royal Assent on 24.02.2025 and will come into force on a date to be confirmed. The new act bring in the much awaited reforms such as power of tribunals to make summary awards, seat of arbitration would govern the arbitration agreement (in absence of a choice of law clause), provisions for enforcement of emergency awards, immunity to arbitrators in cases of resignation / removal.
Disclaimer
The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at knowledge@sarthaklaw.com.