Supreme Court On Arbitration: 25 Key Judgments From 2025
Krishna Vijay Singh & Muneeb Rashid Malik
8 Jan 2026 1:24 PM IST
The Supreme Court of India pronounced numerous judgments in the matters related to the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) in the year 2025. In this write-up, 25 important pronouncements are briefly discussed.
The Supreme Court held that interference by a High Court under Articles 226 and 227 of the Constitution with orders passed by an arbitral tribunal is permissible only where the order is completely perverse, such that the perversity stares on the face of the record. It was emphasised that High Courts ought to discourage litigation that interferes with the arbitral process, as excessive judicial intervention is antithetical to the efficiency and efficacy of arbitration. It was observed that the jurisdiction under Articles 226 and 227 should be exercised with great circumspection and only in cases of exceptional rarity or where bad faith is demonstrably shown. Interdicting the arbitral process ought, therefore, to be avoided except in the most extraordinary circumstances. In the present case, it was found that the High Court failed to indicate how or in what manner the order passed by the arbitral tribunal was perverse and its interference was therefore unjustified.
2. Do the provisions of the Limitation Act apply to Section 34 proceedings?
The Supreme Court held that Section 4 of the Limitation Act applies to proceedings under Section 34(3) of the Arbitration Act. Section 4 of the Limitation Act operates only where the prescribed period, namely the three month limitation period under Section 34(3), expires on a court holiday in which event the Section 34 arbitration application filed on the next working day would be within limitation. However, Section 4 of the Limitation Act does not assist a party where the three month period expires on a working day and the additional condonable period of thirty days under the proviso to Section 34(3) of the Arbitration Act even if expiring during court holidays does not survive beyond the statutorily prescribed outer limit. Consequently, neither Section 4 nor any other provision of the Limitation Act can be invoked to extend the filing period beyond what Section 34(3) of the Arbitration Act permits. Since Section 4 of the Limitation Act applies to Section 34 proceedings, the applicability of Section 10 of the General Clauses Act stands excluded by virtue of its proviso, which operates where the Limitation Act applies. It was clarified that reading the Limitation Act alongside the Arbitration Act is intended not to restrict the special remedy under the Arbitration Act but to facilitate its exercise in circumstances contemplated under the Limitation Act. In this context, Section 29(2) of the Limitation Act assumes significance, as it incorporates Sections 4 to 24 of the Limitation Act into special statutes, including the Arbitration Act, unless expressly excluded. The language of Section 34(3) of the Arbitration Act and its proviso do not expressly or impliedly exclude Section 4 of the Limitation Act, and such an interpretation accords with the protective principle underlying Section 29(2) of the Limitation Act. Given that remedies under Sections 34 and 37 of the Arbitration Act are inherently limited, limitation provisions must be construed in a manner that preserves, rather than extinguishes, these remedies.
The Supreme Court noted a direct conflict between the judgments of two Coordinate Benches in Jharkhand Urja Vikas Nigam Limited v. State of Rajasthan and Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Private Limited (Unit 2). The decision of a three-Judge Bench in M/s India Glycols Limited and Another v. Micro and Small Enterprises Facilitation Council, Medchal–Malkajgiri and Others, which, relying on Gujarat State Civil Supplies Corporation Limited, had held that a writ petition under Articles 226/227 of the Constitution was not maintainable since Section 18 of the MSMED Act provides for recourse to a statutory remedy by way of an application under Section 34 of the Arbitration Act. Expressing reservations about the dictum in M/s India Glycols Limited, the Supreme Court held that, in view of the divergence in precedent, it was appropriate to refer the matter to a larger Bench of five Judges to consider the following questions: (i) Whether the ratio in M/s India Glycols Limited (supra) that a writ petition could never be entertained against any order/award of the MSEFC completely bars or prohibits maintainability of the writ petition before the High Court?; (ii) If the bar/prohibition is not absolute, when and under what circumstances will the principle/restriction of adequate alternative remedy not apply? (iii) Whether the members of MSEFC who undertake conciliation proceedings, upon failure, can themselves act as arbitrators of the arbitral tribunal in terms of Section 18 of the MSMED Act read with Section 80 of the A&C Act? The first and second question will subsume the question of when and in what situation a writ petition can be entertained against an order/award passed by MSEFC acting as an arbitral tribunal or conciliator. It was further held that access to the High Courts under Article 226 of the Constitution is not merely a constitutional right but forms part of the basic structure of the Constitution available to every citizen in cases of violation of constitutional or statutory rights. The rule of alternative remedy is not an absolute bar to the exercise of writ jurisdiction but a rule of self imposed judicial restraint. The power under Article 226 is plenary in nature and cannot be curtailed by statute. It is well settled that writ jurisdiction may be exercised despite the availability of an alternative remedy, at least in three contingencies: (i) where there is a violation of principles of natural justice or fundamental rights; ii) where an order in a proceeding is wholly without jurisdiction; or iii) where the vires of an Act is challenged.
4. When can an arbitral award be set aside on the ground of patent illegality?
The Supreme Court held that courts must exercise a high degree of restraint while examining the validity of an arbitral award, particularly where the award has been wholly or substantially upheld under Section 34 of the Arbitration Act. The court cannot undertake an independent assessment of the merits of the award and is confined to ascertaining whether the exercise of jurisdiction under Section 34 has exceeded the statutory limits. The expression “public policy of India” was clarified to mean the fundamental policy of Indian law, which includes violations of Indian statutes linked to public policy or public interest, disregard of binding orders of superior courts and outcomes that offend basic notions of justice or morality. An arbitral award may be set aside on the ground of patent illegality only where such illegality goes to the root of the matter, however, reappreciation of evidence is impermissible under the guise of patent illegality.
5. What is the scope of interference in an appeal under Section 37 of the Arbitration Act?
M/s C & C Constructions Ltd. v. IRCON International Ltd, 2025 INSC 138 (Judgment dated 31.01.2025)
The Supreme Court held that Section 37 of the Arbitration Act confers a narrowly circumscribed appellate jurisdiction, particularly where an arbitral award has been upheld, wholly or substantially, under Section 34. The jurisdiction of the appellate court under Section 37 is akin to and cannot exceed the limits prescribed under Section 34. Consequently, while examining an order setting aside or refusing to set aside an arbitral award, the court cannot undertake an independent assessment of the merits of the award and is confined to ascertaining whether the court exercising jurisdiction under Section 34 has acted within the bounds of that provision. The scope of interference under Section 37 thus remains restricted and is subject to the same grounds as are available for challenging an award under Section 34 of the Act.
6. What is the jurisdiction of Indian courts in cross border arbitration?
Disortho S A S vs Meril Life Sciences Private Limited, 2025 INSC 352 (Judgment dated 18.03.2025)
The Supreme Court held that a contract must be interpreted as a whole, giving effect to all its provisions unless they are irreconcilably inconsistent. In this matter, Clause 16.5 stipulated that the agreement would be governed by Indian law and that courts in Gujarat would have jurisdiction over all matters arising from the agreement. Clause 18 designated Bogotá as the venue of arbitration but did not expressly exclude the jurisdiction of Indian courts. It was held that Clause 16.5 and Clause 18 could coexist, with Colombia serving as the venue for arbitration while Indian courts retained supervisory jurisdiction. It was reiterated that the law governing an arbitration agreement is determined by express choice, implied choice, or the law with the closest connection. In the absence of an express choice, the lex contractus, namely Indian law, would ordinarily govern the arbitration agreement. It was further clarified that the venue of arbitration does not necessarily determine the law governing the arbitration agreement or the jurisdiction of supervisory courts. It was also held that the agreement's reference to Colombian law was confined to the arbitration proceedings as well as the award and did not govern the arbitration agreement itself.
The Supreme Court held that a contractual clause barring the payment of interest is interpreted differently under the Arbitration Act, 1940 and the Arbitration Act, 1996. While adjudicating matters under the 1996 Act, the Supreme Court has been circumspect in applying principles evolved under the 1940 Act particularly in view of the express statutory recognition of the arbitrator's power to award interest under Section 31(7) of the 1996 Act. Under the 1940 Act, a stricter approach prevailed, requiring a clear and express contractual stipulation barring payment of interest in cases of difference, dispute, misunderstanding, delay in payment or in any other circumstances whatsoever to operate as a bar on the arbitrator's power to grant interest. A clause merely stating that interest shall not be payable on amounts due under the contract would not be insufficient. In contrast, under the 1996 Act, where Section 31(7)(a) gives primacy to party autonomy, interest becomes non payable once the contract expressly provides to the contrary.
8. Does Section 12 of the Limitation Act apply to proceedings u/s. 34 of the Arbitration Act?
The Supreme Court held that the statutory language of Section 34(3) of the Arbitration Act clearly stipulates the limitation period as three months, as distinct from the condonable period of thirty days. This difference in language unambiguously demonstrates the legislative intent that the limitation period is three calendar months and not ninety days. Consequently, three months cannot be read as ninety days in the context of Section 34(3). There is nothing in the statutory language or scheme of Section 34(3) that is contraindicative of the applicability of Section 12(1) of the Limitation Act. On the facts, since Section 12(1) applies, the date of receipt of the signed copy of the arbitral award is liable to be excluded and the three month limitation period is to be reckoned from 10.04.2022 expiring on 09.07.2022 which was a second Saturday when the court was not working. Accordingly, the benefit of Section 4 of the Limitation Act accrued to the respondent and the application filed on 11.07.2022 being the next working day of the court, was within the limitation period. There being no delay, no question of showing sufficient cause for condonation arose and the High Court rightly allowed the appeal under Section 37 and held that the respondent's application under Section 34 was filed within limitation.
The Supreme Court held that issuance of a notice invoking arbitration under Section 21 of the Arbitration Act is mandatory, as it fixes the date of commencement of arbitration, which is crucial for determining limitation and the applicable law, and is a prerequisite for filing an application under Section 11. However, the mere non-issuance of such notice to certain persons who are parties to the arbitration agreement does not denude the arbitral tribunal of its jurisdiction to implead them during the arbitral proceedings. It was clarified that the purpose of an application under Section 11 is confined to the appointment of an arbitrator when the agreed appointment mechanism fails, and at that stage the court undertakes only a limited and prima facie examination of the existence of the arbitration agreement and the parties thereto. Consequently, the fact that a court does not refer a particular party to arbitration in its Section 11 order does not finally determine the issue nor does it curtail the arbitral tribunal's jurisdiction to implead such party during the proceedings. It was further held that the decisive consideration for impleadment before the arbitral tribunal is whether the person sought to be impleaded is a party to the arbitration agreement, and this jurisdictional issue must be determined by the arbitral tribunal under Section 16 by examining whether a non-signatory qualifies as a party to the arbitration agreement in terms of Section 7 of the Arbitration Act.
The Supreme Court held that an arbitral award is not liable to be interfered with merely on the ground that it is illegal or erroneous in law particularly where such interference would require reappreciation of the evidence led before the arbitral tribunal. Where two views are possible, the court has no jurisdiction to reassess the evidence or substitute its own view for that taken by the arbitrator whose view must ordinarily be accepted and allowed to prevail. The scope of interference in arbitral matters is strictly confined to the limits prescribed under Section 34 of the Arbitration Act and proceedings under Section 34 are summary in nature unlike a full fledged civil suit or appeal. An arbitral award can be interfered with only if it is contrary to the substantive provisions of law, the provisions of Section 34, or the terms of the agreement. It was reiterated that the jurisdiction under Section 34 is restrictive and must be exercised with restraint as arbitral autonomy must be respected and judicial interference kept to a minimum to preserve the object of the Arbitration Act. Merely because an alternative or different interpretation of a contractual clause is possible does not justify setting aside an arbitral award.
11. Can an arbitral award be modified?
Gayatri Balasamy v. M/s ISG Novasoft Technologies Limited, 2025 INSC 605 (Judgment dated 30.04.2025)
A Constitution Bench of the Supreme Court by 4:1 held that courts have limited powers to modify arbitral awards while exercising powers under either Section 34 or 37 of the Arbitration Act. This limited power can be exercised when the award is severable, by severing the invalid portion from the valid portion of the award; by correcting any clerical, computational or typographical errors which appear erroneous on the face of the record; post award interest may be modified in some circumstances; and/or the special powers of the Supreme Court under Article 142 of the Constitution can be applied to modify awards but this power must be exercised with great caution within the limits of the Constitution. Justice KV Viswanathan delivered a dissenting opinion by holding that courts cannot modify an arbitral award unless expressly authorised by the law since it amounts to exercising a merits review.
12. Can the arbitral tribunal implead non-signatories to the arbitration agreement on its own accord?
The Supreme Court held that there is nothing in the scheme of the Arbitration Act that prohibits or restrains an arbitral tribunal from impleading a non-signatory to arbitration proceedings on its own accord. Where such impleadment is undertaken after considering applicable legal principles, including the doctrines of group of companies, alter ego, composite transaction, and similar doctrines, the arbitral tribunal is fully empowered to summon a non-signatory to participate in the arbitration. This power flows from the wide jurisdiction conferred on arbitral tribunals particularly their competence to rule on their own jurisdiction, including objections relating to the existence or validity of the arbitration agreement. Since impleadment of a non-signatory essentially concerns jurisdiction and consent, it squarely falls within the tribunal's domain and is not barred by any statutory prohibition. Accordingly, even in the absence of an express provision, authorising impleadment of a party otherwise bound by the arbitration agreement, the tribunal possesses such power under the doctrine of implied powers, provided the exercise of that power is consistent with the scheme of the Arbitration Act and based on express or implied consent to arbitrate. Further, considering the scope and object of Section 21 in contrast with Section 23, mere non-service of a notice of invocation does not nullify the tribunal's jurisdiction over a party. Such party may be impleaded and arrayed in the arbitration if any claim or counter-claim is made against it in the statement of claims or counter-claims, or even by amendment of the memo of parties, provided it is found to be bound by the arbitration agreement either as a signatory or, in the case of a non-signatory, in terms of the principles laid down in Cox and Kings judgment of the Supreme Court.
The Supreme Court held that the doctrine of Kompetenz–Kompetenz is firmly entrenched in Indian arbitration jurisprudence resting on the principle that an arbitral tribunal is competent to rule on its own jurisdiction including questions relating to the existence or validity of the arbitration agreement. The object of this doctrine is to minimise judicial intervention, thereby reinforcing the concept of party autonomy. It was observed that, at the stage of an application under Section 11(6), the court is only required to satisfy itself that an arbitrable dispute exists and to form a prima facie view on the genuineness or credibility of a plea of coercion. The court is not expected to undertake a detailed examination of the nature of such a plea, which must necessarily be raised and established in the arbitral proceedings. Adopting a contrary approach would risk denying the claimant a forum altogether. Accordingly, it was held that the High Court erred in rejecting the appellant's Section 11(6) applications, and that the questions as to whether the appellant was compelled to sign the standardised voucher/advance receipt under economic duress, and whether, despite receipt of Rs. 1,88,14,146.00 against a claim of Rs. 5,71,69,554.00, the claims were referable to arbitration, squarely fell within the domain of the arbitral tribunal.
K. Mangayarkarasi & Anr. v. N.J. Sundaresan & Anr., 2025 INSC 687 (Judgment dated 09.05.2025)
The Supreme Court held that when the arbitrability of a dispute is opposed on the ground of fraud, courts must examine whether a mere allegation of fraud is sufficient to exclude the dispute from arbitration or whether such a challenge can be adjudicated by the arbitral tribunal under Section 16 of the Arbitration Act. The arbitrability of a dispute depends on three factors: whether the dispute is capable of being adjudicated and settled by arbitration; whether the dispute is covered by the arbitration agreement; and whether the parties have referred the dispute to arbitration. These factors must be assessed keeping in view any express or implied exclusion of certain categories of disputes from arbitration particularly those involving actions in rem which are reserved for adjudication by public fora as a matter of public policy. It was clarified that not all trademark related disputes are non arbitrable especially those concerning rights in personam. It was further held that the arbitral tribunal enjoys wide jurisdiction under Section 16, and even disputes where a contract is alleged to have been discharged by a full and final settlement can be referred to arbitration if such settlement is alleged to be vitiated by fraud, coercion or undue influence. As long as an arbitration agreement exists, courts must adopt an enabling approach and refer parties to arbitration. Accordingly, the dispute in the present matter was held to be arbitrable.
15. Whether the court under Section 11 has to confine its consideration as to the existence of an arbitration agreement?
The Supreme Court held that sub-section (6A) of Section 11 makes it clear that, while considering an application under sub-sections (4), (5), or (6), the Supreme Court or the High Court, as the case may be, shall, notwithstanding any judgment, decree, or order of any court, confine its examination to the existence of an arbitration agreement. It was found that the High Court erred in bifurcating the appellant's claim into arbitrable and non-arbitrable parts despite having found that an arbitration agreement existed between the parties. The proper course was to leave it open to the parties to raise the issue of non-arbitrability of certain claims before the arbitral tribunal, which, if raised, could then be considered and decided by the tribunal.
16. Whether it is permissible for a non-signatory to remain present in an arbitration proceeding?
Kamal Gupta & Anr. v. M/s L. R Builders Pvt. Ltd. & Anr., 2025 INSC 975 (Judgment dated 13.08.2025)
The Supreme Court held that the permission granted to a non-signatory to remain present in all proceedings before the arbitrator was without jurisdiction and beyond the scope of the Arbitration Act. Arbitration proceedings can take place only between parties to an arbitration agreement and since Section 35 does not render an arbitral award binding on non-signatories, the Arbitration Act does not confer any legal right upon a non-party to remain present in arbitration proceedings between signatories. The parties to the agreement are bound by its terms and the sole arbitrator is required to adjudicate disputes only between such parties. A stranger cannot be permitted to remain present particularly when the award to be passed would not bind such person. It was also held that once the sole arbitrator had been appointed under Section 11(6), nothing further remained to be done in exercise of jurisdiction under that provision. The prayer by intervenors seeking permission to remain present in the arbitration proceedings was not liable to be entertained as such a request travelled beyond the scope of Section 11(6).
17. Whether the date of disposal of an application under Section 33 of the Arbitration Act marks the starting point of limitation for filing an application under Section 34?
Geojit Financial Services Ltd. v. Sandeep Gurav, 2025 INSC 1021 (Judgment dated 19.08.2025)
The Supreme Court held that where no application under Section 33 of the Arbitration Act is filed, the limitation for filing an application under Section 34 commences from the date of receipt of the arbitral award. However, where an application under Section 33 is filed, the legislature has expressly provided that the starting point of limitation under Section 34(3) would be the date of disposal of such application. It was clarified that once a Section 33 application is filed within the prescribed period, the limitation for challenging the award under Section 34(3) would commence from the date on which the arbitral tribunal disposes of that application, irrespective of whether the tribunal ultimately allows or rejects the request, makes or declines to make any correction or modification, or renders or declines to render an additional award. Any interpretation to the contrary would do violence to the plain and unambiguous language of Section 34(3). What is material for the purposes of limitation is the disposal of the request under Section 33 and not whether the request strictly fell within the scope of that provision so long as it satisfied the statutory requirements of being made within thirty days of receipt of the award and with notice to the other party.
18. Whether an arbitration agreement must necessarily be signed?
The Supreme Court held that a commercial document containing an arbitration clause must be interpreted in a manner that gives effect to the agreement rather than invalidating it. It was observed that a commercial agreement has to be construed according to the sense and meaning gathered, in the first instance, from the terms used, understood in their plain, ordinary, and popular sense, and that, where circumstances permit, courts should lean in favour of giving effect to the arbitration clause agreed upon by the parties. It was further clarified that while an arbitration agreement must be in writing, it need not necessarily be signed. Noting that the requirement of an arbitration agreement being in writing has been retained in Section 7(3) of the Arbitration Act, it was observed that Section 7(4) merely elucidates the circumstances in which such an agreement may be found and does not mandate that it must be signed in every case. The only prerequisite is that the arbitration agreement be in writing, as contemplated under Section 7(3), and this principle applies equally to arbitration agreements falling within the scope of Sections 44 and 45 of the Arbitration Act.
The Supreme Court held that an arbitral tribunal can be divested of its power to award pendente lite interest only where the agreement or contract between the parties is so worded as to expressly, or by necessary implication, bar the grant of such interest. A contractual clause that merely prohibits the payment of interest on delayed payments, by itself, cannot be readily construed as a bar on the arbitral tribunal's power to award pendente lite interest. In the present case, Clause 18.1, when read as a whole, does not expressly or by necessary implication prohibit the grant of pendente lite interest by the arbitral tribunal. It merely stipulates that no interest would be payable by the Corporation on delayed payments or disputed claims. The clause neither restrains the arbitral tribunal from awarding pendente lite interest nor provides that interest would not be payable in any circumstances whatsoever. Consequently, Clause 18.1 does not curtail the statutory power of the arbitral tribunal to award pendente lite interest.
20. What is the effect of undue and unexplained delay in the pronouncement of an arbitral award?
M/s Lancor Holdings Limited v. Prem Kumar Menon & Ors., 2025 INSC 1277 (Judgment dated 31.10.2025)
The Supreme Court held that delay in the pronouncement of an arbitral award, by itself, is not sufficient to warrant its setting aside, rather, each case must be examined on its own facts to determine whether such delay has adversely impacted the arbitral tribunal's findings so as to vitiate the award. It was clarified that only where the effect of undue delay, particularly when unexplained, is apparent on the face of the award and reflects adversely on the decision making process, can such delay be construed as rendering the award in conflict with the public policy of India or vitiated by patent illegality. It was further held that it is not necessary for an aggrieved party to invoke the remedy under Section 14(2) of the Arbitration Act as a condition precedent to challenging a delayed and tainted award under Section 34. Emphasising that the very foundation of arbitration rests on expeditious and effective resolution of disputes, it was observed that an unworkable arbitral award which neither finally resolves disputes nor avoids further litigation, while simultaneously and irrevocably altering the parties' positions, defeats this objective and is therefore liable to be set aside as being opposed to public policy and patently illegal. It was also held that where the conditions for exercise of power under Article 142 of the Constitution are satisfied, such jurisdiction may be justifiably exercised in accordance with the principles laid down in Gayatri Balasamy v. ISG Novasoft Technologies Limited, 2025 INSC 605.
The Supreme Court held that the mere use of the word arbitration is not sufficient to constitute a valid arbitration agreement in the absence of a clear and mandatory intention to refer disputes to arbitration and to be bound by the decision of the arbitral tribunal. Where an agreement provides that the decision of an authority is not final and binding or permits a party dissatisfied with such decision to institute a civil suit, the clause cannot be characterised as an arbitration agreement. Section 7 of the Arbitration Act presupposes an express intention that disputes or differences shall be resolved through arbitration and a mere reference to the term arbitration does not satisfy this requirement. An essential attribute of an arbitration agreement is the element of finality attached to the reference of disputes to arbitration. In the present case, although the respondent did not deny the existence of an arbitration agreement in its responses to the notice issued by the appellant, it was held that where no arbitration agreement existed in the first place, subsequent correspondence between the parties could not alter or displace the original intention. Such correspondence could have been relevant only if it unequivocally reflected an intention to refer disputes to arbitration in terms of Section 7, which was absent in the instant case. Consequently, it was held that there was no arbitration agreement between the parties.
Harshbir Singh Pannu and Anr. v. Jaswinder Singh, 2025 INSC 1400 (Judgment dated 08.12.2025)
The Supreme Court held that Section 32 of the Arbitration Act is exhaustive and governs all cases of termination of arbitral proceedings under the Arbitration Act. The power of the arbitral tribunal to terminate proceedings flows solely from Section 32(2), while Sections 25, 30, and 38 merely indicate the circumstances in which the tribunal may invoke Section 32(2) to bring the proceedings to an end. The use of the expression “the mandate of the arbitral tribunal shall terminate” in Section 32, and its absence in Sections 25, 30, and 38, does not imply that the nature or legal effect of termination under Section 32(2) is distinct from termination under the other provisions. The expression “mandate of the arbitral tribunal” is descriptive of the authority and obligation of the tribunal to conduct the arbitration and adjudicate the disputes referred to it. Irrespective of whether termination occurs by the passing of a final award, withdrawal of claims, default of the claimant, or impossibility of continuation, the legal consequence is the same, namely, that the arbitral reference stands concluded and the tribunal is divested of its authority to act further. The Supreme Court further drew a clear distinction between procedural review and review on merits. It held that an arbitral tribunal possesses an inherent procedural power to recall an order terminating the proceedings where such recall is sought to correct an error apparent on the face of the record or to address a material fact that was overlooked, without amounting to a reappreciation of evidence or reconsideration of the merits. Where an order terminating the proceedings is passed, the appropriate course for an aggrieved party is first to seek recall of the order before the arbitral tribunal itself. If the recall is allowed and proceedings are recommenced, the aggrieved party's remedy lies in participating in the arbitration and, thereafter, challenging the final award under Section 34. If the recall application is rejected, the aggrieved party may approach the court under Section 14(2), whereupon the court would examine whether the mandate of the arbitrator stood legally terminated, and if not, may set aside the termination order and remand the matter to the tribunal or, where circumstances so warrant, appoint a substitute arbitrator under Section 15 of the Arbitration Act.
Mohan Lal Fatehpuria v. M/s Bharat Textiles & Ors., 2025 INSC 1409 (Judgment dated 10.12.2025)
The Supreme Court held that in view of the mandate contained in Section 29A (1) of the Arbitration Act, the arbitrator was obliged to render the award within one year from 01.03.2022 which he failed to do. As no application for extension was made by the parties, the mandate of the sole arbitrator stood terminated under Section 29A (4), rendering him functus officio. It was reiterated that an arbitrator is ordinarily a forum chosen by the parties for resolution of their disputes and once the mandate of the sole arbitrator expired under Section 29A (4), his continuation was impermissible. Section 29A (6) empowers the court to substitute the arbitrator where the mandate has ceased to exist. The Supreme Court rejected the respondents' contention that the earlier rejection of a petition under Sections 14 and 15 by the High Court impacted the Section 29A proceedings, holding that the Arbitration Act provides distinct remedies under Sections 14, 15, and 29A, and that on the earlier date the arbitrator's mandate had not yet terminated. Emphasising the statutory objective of expeditious dispute resolution, it was held that substitution of the sole arbitrator was warranted and that the High Court erred in granting an extension after the mandate had already ceased, thereby necessitating exercise of jurisdiction under Section 29A (6).
The Supreme Court held that the referral court is required to be prima facie satisfied as to the existence of an arbitration agreement and whether the non-signatory is a veritable party thereto. However, even where the referral court reaches such prima facie satisfaction, the arbitral tribunal is not denuded of its jurisdiction to finally determine, on the basis of factual evidence and applicable legal doctrine, whether the non-signatory is indeed a party to the arbitration agreement. In the facts of the case, it was found that the appellant had no privity of contract with the respondent, the appellant was not a party to the documentation between the contractor and the respondent, and both operated on entirely separate orbits. It was not established even prima facie that there was any intention to bind the respondent to the contract between the appellant and the contractor, nor was any consent for assignment shown as required under the tender conditions. Applying both consensual and non-consensual theories, it was held that there was nothing to indicate a legal relationship or intent to arbitrate between the appellant and the respondent. The respondent failed the prima facie test of being a veritable party to the arbitration agreement, leading the Supreme Court to conclude that no arbitration agreement existed between the parties, and accordingly, the judgment of the High Court was set aside.
The Supreme Court held that the expression “patent illegality” encompasses limited situations, such as where the arbitral findings shock the judicial conscience, where the arbitrator has taken into account matters which ought not to have been considered, or has ignored vital material, leading to an unjust result, or where the decision is so irrational that no fair or sensible person could have arrived at it on the given facts. A classic instance of patent illegality is an award based on “no evidence”, meaning that the arbitrator cannot conjure facts or figures out of thin air. If a crucial finding is unsupported by any evidence or results from ignoring vital evidence placed before the tribunal, it may warrant interference. However, this standard must be applied with great caution, as “no evidence” means a complete absence of relevant evidence, and not merely weak or scant evidence. Where there is some evidence such as even the testimony of a single witness or a set of documents on which the arbitrator has relied, the court cannot term the conclusion as patently illegal merely because the evidence has limited probative value. Interference is justified only when the arbitral conclusion is irreconcilable with any permissible view of the evidence. In the present case, it was held that the High Court, while exercising its limited jurisdiction under Section 37, impermissibly re-appreciated the evidence and substituted its own interpretation, contrary to settled law. The alleged errors, including lack of evidence or percentage-based estimations, did not, either singly or cumulatively, amount to patent illegality, as there was some evidence and a logical rationale supporting each component of the award. It was further held that the arbitrator's view was a plausible one that a reasonable person could adopt. It was reiterated that arbitrators are not bound by strict rules of evidence under Section 19 of the Arbitration Act and may draw upon their knowledge and experience, and that judicial interference is unwarranted merely because the reasoning is brief or not exhaustively reasoned, so long as the path to the conclusion is discernible and not absurd.
Authors :
Krishna Vijay Singh is a Senior Partner at the law firm Kochhar & Co
Muneeb Rashid Malik is a Senior Associate at the law firm Kochhar & Co. Views are personal.