As courts across Northern India resume full activity after the summer recess, we’re back in your inbox with fresh updates from the world of arbitration. Stay informed, stay ahead — happy reading!
Domestic Highlights
On 01.05.2025, the Mumbai Centre for International Arbitration (MCIA) updated its existing arbitration rules, replacing the original MCIA Rules, 2016. MCIA Rules, 2025 (2025 Rules) bring out following key changes:
- The 2025 Rules are more in alignment with the Arbitration and Conciliation Act, 1996 (1996 Act) in terms of award timelines, definition of interim awards, termination of proceedings, evidentiary powers such as asking parties to produce relevant / specific documents alongside the statement of defence etc.
- The 2025 Rules allow for consolidation of arbitration proceedings, not only under one arbitration agreements but also for compatible arbitration agreements, related legal relationships, or connected transactions. The 2025 Rules further aim to ease the consolidation procedure.
- With an intention to avoid repetition and enhancing procedural efficiency, the 2025 Rules allow for related arbitrations to be conducted or heard concurrently. This is much like clubbing of litigations by courts.
- Under the 2025 Rules, tribunals can direct parties to maintain the security of shared or stored data and issue orders on breaches.
- Parties are not mandated to disclose funding arrangements, identity of funders, and any obligation to bear adverse costs.
Rendezvous – Indian Courts and Arbitration
Reiterated! Full and final disputes remain within the scope of arbitration despite contract discharge – Arabian Exports v. National Insurance [2025 SCC OnLine SC 1034]
Reiterating its earlier stand on arbitrability of a dispute arising after issuance of full and final discharge voucher and the limited powers of a Section 11 court, the Supreme Court held that under Section 16 of the Arbitration and Conciliation Act, 1996, an arbitral tribunal has the authority to decide its own jurisdiction. Relying on SBI General Insurance v. Krish Spinning and Vidya Drolia v. Durga Trading, it clarified that courts under Section 11 must only assess the existence of a genuine arbitrable dispute—not conclusively decide issues like coercion.
The High Court of Bombay had dismissed a petition seeking appointment of an arbitrator under the insurance policies on the ground that there was no arbitrable dispute after the issue of an undated, standard voucher by the insured.
Reiterated! SC upholds arbitral tribunal’s power to grant varying and compound interest under Section 31(7) of the 1996 Act – Interstate Construction v. National Projects Construction [2025 SCC OnLine SC 1127]
Further concreting its existing jurisprudence on powers of arbitrators to grant and calculate interest, the Supreme Court, reinstated an award of interest on principal amount, which was set-aside by courts under Section 34 and Section 37. The Section 37 Court had concluded that the award granting pre-reference, pendente lite and future interest is illegal as Section 31(7) only recognizes only two periods of interest i.e., from date of cause of action till passing of award and from date of passing of award till actual payment. The Section 37 court had also concluded that the award was illegal so far as it cumulated principal amount with pre-reference and pendente lite and award future interest on both.
The Supreme Court, disagreeing with the above findings, reiterated that arbitral tribunals have discretion under Section 31(7) of the 1996 Act to award different rates of interest for different phases i.e., pre-reference, pendente lite, and post award including compound interest. Relying on earlier precedents, they reiterated that the “sum awarded” includes both the principal and pre-award interest. As per Section 31(7)(b), this entire sum i.e. principal plus interest shall carry post award interest at a rate 2% higher than the prevailing interest rate from the date of the award until the date of payment.
Reaffirmed! Arbitral tribunal’s jurisdiction to decide waiver of arbitration clause under Section 8 of the 1996 Act – Porto Emporios Shipping v. Indian Oil Corporation (IOC) [2025 SCC OnLine Del 3288]
The Delhi High Court allowed IOC’s Section 8 application and referred parties to arbitration. It was held that once a valid arbitration agreement exists, courts are bound to refer disputes to arbitration unless it is prima facie clear that no valid agreement exists or the dispute is manifestly non-arbitrable. In this case, Porto Emporios filed a civil suit in Delhi seeking a declaration that the arbitration clause had been waived or repudiated. IOC responded with a Section 8 application under the 1996 Act, seeking reference to arbitration. This was opposed on the grounds that the arbitration clause was inoperative and that the dispute concerning limitation of liability under international maritime law was non-arbitrable.
Relying on precedents like Vidya Drolia and SBI General Insurance v. Krish Spinning, the Court reiterated that issues such as waiver, non-arbitrability, and jurisdiction are to be decided by the arbitral tribunal under Section 16. It cautioned that allowing such suits would defeat the legislative intent of minimal judicial interference and disrupt the arbitral process.
Arbitral award set aside due to unilateral appointment and lack of proper notice under Section 21 – Supreme Infrastructure India v. Freyssinet Memard [2025 SCC OnLine Del 3305]
The High Court of Delhi set aside an arbitral award on the ground that the appointment of an arbitrator unilaterally without proper notice being served and due diligence vitiates the arbitral proceedings.
Bye-Laws cannot override the statutory right to challenge an arbitral award under Section 34 – Harshvardhan Metals v. ISF Commodities [O.M.P. (COMM.) 351 of 2020]
The Bye – Law 15.40 of the Multi Commodity Exchange of India Ltd. obligate the party dissatisfied with the award to deposit the amount before filing an appeal. The High Court of Delhi has interpreted the said bye-laws and held that the pre-condition for deposit cannot be held to be mandatory as the 1996 Act does not impose such conditions.
No Prescribed Format for Arbitration Notice, Intent and Dispute Identification Sufficient– National Research Development Corporation (NRDC) v. Ardee Hi-Tech [Arbitration Petition No. 1494 of 2024]
In a recent judgment on a Section 11 application, the Hon’ble Delhi High Court addressed two key issues: (i) the applicability of Section 14 of the Limitation Act, 1963, and (ii) the requirements of a valid Section 21 notice under the Arbitration and Conciliation Act, 1996. The dispute arose from a Tripartite Agreement and had earlier been referred to arbitration, where the Tribunal held the claims to be premature. After unsuccessful proceedings under Sections 34 and 37, NRDC filed a fresh Section 11 application. Relying on Supreme Court precedent, Court granted the benefit of Section 14 to exclude the prior time spent on bonafide litigation. On the issue of the Section 21 notice, the Court, referring to its earlier ruling in Prasar Bharati v. Visual Technologies India, held that the NRDC’s demand letter satisfied the legal requirements of a valid arbitration notice i.e. (i) dispute between the parties; (ii) demand to resolve dispute as per arbitration clause (iii) notice be properly served to the Ardee Hi-Tech, and hence set out directions and referred the matter to arbitration, and accordingly referred the matter to arbitration.
Rajasthan High Court upholds arbitral award; rejects liquidated damages imposed by defaulting party – Rajasthan Urban Infrastructure Development Project (RUIDP) v. National Builders [D.B. Civil Miscellaneous Appeal No. 5151/2019]
The Rajasthan High Court dismissed RUIDP’s appeal under Section 37 of the 1996 Act, holding that a party responsible for the delay cannot impose liquidated damages. The Court upheld the arbitrator’s award directing refund of such damages, citing the limited scope of interference under Section 34 & 37. In the present case, the arbitrator awarded over Rs. 41 lakh with interest and costs to National Builders for delayed payments, rejecting RUIDP’s claims for excise duty recovery, interest on mobilization advance, and deductions for documentation lapses. The High Court found that the arbitrator’s conclusions were based on facts and proper contractual interpretation, particularly noting that 458 out of 463 days of delay was due to RUIDP.
Section 29A timelines have no relevance to MSME Council arbitrations – Board of Major Port Authority v. Marinecraft Engineers [2025 SCC OnLine Cal 3021]
Recently, in an interesting judgment, the Calcutta High Court rejected a Section 34 objection to an arbitral award made by the West Bengal MSME Facilitation Council in favour of Marinecraft Engineers. The Board of Major Port Authority contended that the award was made after expiry of the12-month period under Section 29A of the 1996 Act and was hence liable to be set-aside. The Court held that proceedings under Section 18 (3) of the MSMED Act are part of a special statutory scheme, and Section 29A does not apply to the proceedings. The Court reaffirmed that work contract disputes of MSME suppliers squarely fall within the jurisdiction of the MSME Council.
Unsigned pre-agreements and arbitration clauses are not meant to substitute Section 8 – Dr. S. Abhilash v. Prasanth Busareddy [CMA No. 692 of 2023, Telangana HC]
The Telangana High Court, while upholding the rejection of the Section 8 application, held that unacted and unsigned draft agreements by email cannot constitute a valid arbitration agreement under Section 7 of the 1996 Act. Dr. S. Abhilash had sought reference to arbitration based on such drafts, but the Court noted that Dr. S. Abhilash, in his pleadings referred to the draft agreements as “null and void”. The Court decided that since there was no final contract with an arbitration clause, it was right for the trial court to continue with the lawsuit for specific performance.
Global Highlights
- The World Arbitration Update (WAU) commenced on 20.05.2025 at the Leiden Law School Hague and was scheduled to continue in multiple locations. The WAU aimed at bringing together members of the arbi tral community. This conference was launched with the sole intent to create a space for real – time insights into the world of arbitration.
- The London International Dispute Week (LIDW) conducted a series of sessions which focused on how courts and institutions promote and strengthen arbitration. The sessions discussed topics like – ‘An Ideal Seat? Perspectives from Established and Emerging Seats’ where participants put forward arbitration seats which have shown good results and emerging seats such as Abu Dhabi, Dubai, Ruanda and Malaysia.
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.